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COFtfR'.GHT DEPOSIT. 



Financing ihePeople 

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BY TUE/R FRUITS Y£ SHALL KNOW THEM 



BOSTON 
THE FOUR SEAS COMPANY 



■! 






X 



Financing The People 

AND 

Abolishing Crime 




BY 



STERLING P. KING 

Author: — "The Railways and The People" 

"The Poor Looking Forward" 

"Prize Essay on the Tariff" 

Etc. Etc. 



BOSTON 
THE FOUR SEAS CO. 






Copyrighted 1922 by Sterling P. King 
All rights reserved 



C1A690399 

NOV 27 72 



A*0 j 



PREFACE 

A condition has arisen in the industrial and 
economic affairs of the United States which the 
existing financial system cannot meet. Produc- 
tive enterprises are perishing for lack of oper- 
ating capital, and the financiers frankly admit 
they cannot supply this need without danger of 
losing their loans. These financiers are rapidly 
becoming more ''conservative" and are withdraw- 
ing loans from the small enterprises and extend- 
ing an ever-increasing amount of credit to the 
large concerns. This means that the financiers 
are deliberately taking the business from the 
small business man and transferring the wealth 
accumulating enterprises into the control of the 
larger ones. Wealth is thereby congested in the 
hands of the few and poverty disseminated among 
the many. 

The purpose of this volume is to suggest a way 
to overcome these disastrous influences, and pro- 
pose a financial system which will enable all classes 



to share in its benefits. While meeting these re- 
quirements as a financial system it also acts as 
a preventive of crime; and incidentally pays the 
government expenses without further tax levies. 

The Author. 
Jacksonville, Fla., 1922. 



CHAPTER I 

A NEW FINANCIAL SYSTEM IMPERATIVE 

In 1911, President Wilson stated: "The great 
monopoly in this country is the money monopoly. 
So long as that exists, our variety and freedom 
and individual energy of development are out of 
the question. A great industry is controlled by 
its system of credit. Our system of credit is con- 
centrated. The growth of the nation, therefore, 
and all our activities are in the control of a few 
men, who, even if their activities be honest and 
intended for the public interest, are necessarily 
concentrated upon the great undertakings in 
which their money is involved, and who, necessa- 
rily, by every reason of their own limitation, 
chill and check and destroy genuine economic free- 
dom. 

"This is the greatest question of all ; and to this 
statesmen must address themselves with an earn- 
est determination to serve the long future and 
the true liberties of man." 

This sentiment was expressed before President 



6 FINANCING THE PEOPLE 

Wilson became the Chief Executive of the nation, 
but the concentration of credit, which was char- 
acterized as such a menace at that time, has con- 
tinued with increasing virulence down to the pres- 
ent date; and the great money monopoly of that 
date is a far greater monopoly at the present time. 
And, anomalously, this menace increased and the 
monopoly thrived beyond precedent, and without 
molestation, under the administration of the man 
who so vividly portrayed the evils in the state- 
ment above quoted; and during eight years' in- 
cumbency as Chief Executive no effort was made 
to remove the menace nor even check the monopo- 
listic growth. 

This statement is not made in disparagement 
of President Wilson. It is recording the prevail- 
ing attitude of American statesmen toward finan- 
cial and industrial monopolies. Ambitious states- 
men will see the public unmercifully imposed upon 
and plundered rather than go counter to the 
wishes of these powerful combinations of capital 
and thereby incur their certain opposition at the 
following election. 

FINANCE AND INDUSTRY UNBALANCED 
American industry, production and finance are 
not, at present, working together harmoniously. 
And a new financial system is needed that will 



AND ABOLISHING CRIME 7 

harmonize with industrial expansion and meet the 
needs and requirements of the public. Business 
and industry have so outstripped the financial 
system that it no longer promotes their growth 
and development, but is now a very heavy load 
for them to carry. It wohW seem like an extrav- 
agant expression to charge a total absence of any 
financial system; I will, therefore, content myself 
at this stage of the discussion, by stating that the 
present one is grossly inadequate to permit a max- 
imum production and consumption of the necessi- 
ties and comforts of life. 

Right now America needs increased produc- 
tion. The financiers so state. But what are they 
doing to alleviate this condition? Are their ac- 
tivities controlled by any desire to bring relief 
along this line? Or rather is not their business 
directed along lines that will bring them the best 
security and net them the largest profits, and this, 
regardless of whether the customers are engaged 
in stifling or increasing production? Is the finan- 
cier influenced to any degree in the question of 
putting his money behind a productive or a non- 
productive business? These matters, while grave 
as viewed from the public standpoint, are entirely 
ignored and passed without consideration by the 
financiers when placing their loans ; and the great- 
er the need of productive industry the less likely 



8 FINANCING THE PEOPLE 

it is to get financial assistance. As the needs of 
industry increase finance turns its back and faces 
in the direction where need is not pressing and 
where easy money prevails and securities are am- 
ple. 

This disposition has produced a very peculiar 
condition in economic and industrial affairs. The 
value of the annual production of finished com- 
modities, after eliminating all double and cumula- 
tive valuations, is right at $25,000,000,000. These 
products go to the consumers at an estimated cost 
of $68,000,000,000. This indicates a $43,000,000,- 
000 gap to be filled between the ultimate producers 
and the ultimate consumers. These finished com- 
modities must pass through many hands, and re- 
ceive large accretions of profits and expenses to 
bring their total value up to the maximum of $68,- 
000,000,000. 

The clearing-house reports, for 1919, show that 
the business transacted through the banks exceed- 
ed $325,000,000,000 for that year. In 1920, and 
1921, this business had increased to more than 
$400,000,000,000 annually. Other billions of bus- 
iness did not go through the clearing houses and 
is not, therefore, included in these figures. This 
huge total business was developed from the basic 
products put out by farms, mines and factories; 
and, as before stated, carried a value of approxi- 



AND ABOLISHING CRIME 9 

mately $25,000,000,000. This large aggregate bus- 
iness developed from that base represent a turn- 
over that is increasing prices beyond endurance. 
On each dollar's worth of finished products a bus- 
iness in excess of fifteen dollars is developed. And 
the profits made on these transactions, and which 
are added to the cost of the commodities between 
the producers and the consumers, amount to $43,- 
000,000,000 and more. Thus a commodity having 
a primary cost of one dollar has a retail price of 
nearly three dollars when passed to the consumers. 
Stated differently, the consumers pay one dollar 
to the producers and nearly two dollars to the 
agencies intervening between the producers and 
the consumers. It is, therefore, evident that if 
the production could be doubled the intervening 
concerns could make their aggregate profits by 
the addition of one dollar to the producers' price, 
thereby enabling them to release the commodities 
to the consumers at two dollars for every dollar 
paid to the producers, thus selling for two dollars 
what formerly cost three. This would double the 
producer's aggregate receipts and give the inter- 
venors a wider base upon which to spread their 
profits. 

While this increased production is needed, and 
advised b> the financiers, they are inferentially 
advising that it must be accomplished without 



10 FINANCING THE PEOPLE 

their assistance. They are deliberately restrict- 
ing credit to "gilt edged securities'' and those hav- 
ing "ratings that will enable them to be easily 
marketed." 

TWO KINDS OF CREDIT 
There are two kinds of credits and if these are 
kept in mind, and the finances of the country 
properly adjusted to the needs of the two, a great 
good will result. 

One credit is a productive, or constructive, 
credit. This is the one that backs productive en- 
terprises and enables them to supply the demands 
of the public. These enterprises, as we have seen, 
are needing more, rather than less, credit, and to 
deflate productive credit will tend to reduce pro- 
duction and ultimately increase the price of the 
things produced. If a maximum credit could be 
extended to production a maximum output of 
mine, factory, and farm products would result. 
This would tend to reduce prices to the consumers. 
High prices usually result from a deficiency of 
productive credit coupled with an excess of spec- 
ulative credit. If the farmers had a financial sys- 
tem that would back them, when they need assist- 
ance, they could double the farm yield with ease. 
On account of having no financial system applica- 
ble to the farming industry this needed assistance 



AND ABOLISHING CRIME 11 

is not available, and the farmers are working 
against a handicap that limits their production to 
individual efforts without material financial sup- 
port. 

Banks withhold credit from farmers as a class. 
This outlaws them under the present financial sys- 
tem and curtails production of these necessary 
products, with the result that it injuries the farm- 
ers as a class by reducing their incomes, and in- 
juries the public as consumers by greatly increas- 
ing their outgo on a smaller consumption. 

The second kind of credit is that extended to 
non-productive enterprises. This includes the 
credit given to business, speculators and middle- 
men. Most credit is extended to this non-produc- 
tive group. This is where business and industry 
overbalance production. President Harding stat- 
ed the fact recently that nearly half of the wealth 
of the United States is invested in farms. In the 
face of this fact it is proposed to extend a loan of 
$1,000,000,000 to this industry while the railroads 
with less than twenty per cent of the farm values 
are being extended favors much in excess of this 
amount. The total credits now extended to va- 
rious industries and enterprises in the United 
States is much in excess of $100,000,000,000, and 
the farms with nearly half of the basic wealth are 
permitted to use about 6 per cent of the credit, and 



12 FINANCING THE PEOPLE 

this is extended as a benefaction and classes the 
farmers as beggars. 

Productive enterprises generally fall in the 
same category as the farms but not so severely— 
the smaller enterprises being denied credit while 
the larger ones generally get sufficient. Some- 
thing near twenty per cent of the credit of the 
country is extended on production and 80 per cent 
on activities whose profits and expenses represent 
the difference between what the producers get and 
what the consumers pay. Thus about four times 
as much credit is extended on these non-produc- 
tive undertakings as on the ones that put out the 
basic products which feed business and industry. 
This large amount of credit extended to the non- 
productive undertakings enables the business and 
speculative enterprises to pass these basic prod- 
ucts through three to six, or more, hands before 
reaching the consumers. The profits and expenses 
attaching to the process of passing through these 
various hands produces the two dollars increase 
on every basic dollar of output, — 200 per cent 
raise above the producers selling price. This con- 
dition is brought about by extending greatly more 
credit to pass commodities from the sources of 
production to the consumers than is placed upon 
the enterprises engaged in putting out these com- 
modities. 



AND ABOLISHING CRIME 13 

Relief can only come through an equalization 
of the credit and adjusting it to meet a custom 
that has suddenly developed a very serious condi- 
tion. An intelligent deflation of the speculative 
credit would deflate industry that is now so ex- 
panded that it is doing a business in excess of 
§325,000,000,000 annually on the basic products 
valued at something like $25,000,000,000, and ad- 
ding to this value near 200 per cent for the public 
to pay. 

WASTING FREIGHT FACILITIES 
THIS SPECULATIVE FEATURE OF BUSI- 
NESS IS REFLECTED IN THE TRANSPORTA- 
TION PROBLEMS. When the farmers are want- 
ing cars to move their crops the speculators are 
utilizing them to transport merchandise from one 
speculator to another. According to the railroad 
statistics the freight handled in 1919, was valued 
at $150,000,000,000. The original value of this 
freight was not $25,000,000,000. This gives some 
idea how many times this huge freight tonnage 
was loaded and unloaded — hauled from one dealer 
to another — in order to bring its total value up 
to the $150,000,000,000 mark. 

A withdrawal of this speculative credit would 
force commodities to go to the consumers to find 
a market. The tendency now is for one specula- 



14 FINANCING THE PEOPLE 

tor to find another as a purchaser for his stock 
of merchandise, and thus retain it from the con- 
sumers until the prices become so inflated that 
there is no longer any speculation in it. This 
method must waste a very large per cent of the 
freight facilities and congest freight traffic to 
the extent of demoralizing legitimate business. 

STIFLING LITTLE BUSINESS 

The determination of the financiers to extend 
credit only on gilt-edge securities, having a com- 
mercial rating, is a direct assault on Little Busi- 
ness. Only securities that have a marketable val- 
ue with the large financial institutions must be 
accepted. The small country bank now accepts 
paper with the understanding that it may be 
cashed in the large central banks if it comes up 
to their requirements. The opinion of the local 
banker is no longer controlling, and he makes the 
loans to meet the whims of the city banker who 
is probably thousands of miles removed from the 
customers. This means that the customers must 
have a commercial rating to get the desired con- 
sideration at the hands of the concerns who have 
the money and credits to loan. This withdraws 
the credit from the small business whether pro- 
ductive or non-productive. Under this arrange- 
ment the small business must go; and it is very 



AND ABOLISHING CRIME 15 

rapidly disappearing as an economic or industrial 
factor, and the banks are making no efforts to 
save it. 

The banks had rather loan large amounts to 
a few than small amounts to a large number. It 
is easier, less expensive and safer under the pres- 
ent methods. It is a matter of business for them 
to encourage large loans and discourage small 
ones. This is the policy banks are following and 
it is building up the large enterprises and destroy- 
ing the small ones. 

The farmers, and business men of small means, 
who cannot get sufficient financial support to ope- 
rate individually, abandon the effort and become 
a wheel in the large machine where they can get 
a "living wage" and the machine gets the profits 
which result from their labor. 

This tendency to concentrate credit on large 
concerns has been increasing with marked rapid- 
ity in recent years, until at present, even under 
favorable conditions, the small business is shut 
off from a participation in the country's credits. 
Bankers state frankly that they have as many 
large loans as they can handle, and, therefore, do 
not care to handle small ones. As long as capital- 
ists want the maximum of credits they will be ex- 
tended to small business very gingerly, and as long 
as they are withheld from small business there 



16 FINANCING THE PEOPLE 

will be an increased demand for the loans among 
the large concerns. It is a policy that works ev- 
erything into monopolistic control. The very fact 
that credit is denied to small business gives the 
banks more large loans to take care of. In this 
way banks are building up their largest and best 
customers and at the same time helping them re- 
move their small rivals. 

When the order goes forth to curtail credit the 
large enterprises are not frightened to any degree. 
They know that they will continue to get the nec- 
essary credit, and that the withdrawal of credit 
will let down many of their small competitors. 

LABOR OUTLAWED 

Labor with an estimated intrinsic value of 
$200,000,000,000 to $300,000,000,000 has no rat- 
ing in money circles and, therefore, has no credit 
to lose. It has an estimated value in excess of all 
tangible wealth and, yet, it stands outlawed under 
the rules of the financial monopoly. A ban is thus 
placed on 35,000,000 of the country's producers 
excluding them from the benefits flowing from a 
financial system. There are more than 35,000,000 
on the farms who by reason of their small indi- 
vidual holdings are placed by financiers in the same 
class with labor. By adding to these two great 
divisions of American citizens the small business, 



AND ABOLISHING CRIME 17 

which is outside of the favor of the financiers, a 
total in excess of 80,000,000 of the population is 
easily obtained, who are living outside of the es- 
tablished system; while a bare ten per cent are 
able to get maximum requirements. 

The vast majority of these outlawed citizens 
are the wealth producers of the country, and, yet, 
financiers will not assist them to do this indispen- 
sible work; but are ready to extend large sums 
to the ones who speculate on these products as 
soon as labor releases them. 

It is not the fault of productive labor that it is 
denied credit ; the fault is in the system. The im- 
mediate need is for a system that is also a labor 
system. It must be willing to go into the fields 
of production and help do some of the drudgery. 
If a farmer can produce crops to the value of $1,- 
000 without capital and to the value of $2,000 with 
the necessary capital, the new finance must be 
willing to help produce the larger amount. It 
must work for a maximum production instead of 
a maximum manipulation of wealth after it is pro- 
duced. 

Small business should be re-established and 
supported otherwise the people will degenerate 
into mere machines and lose the originality nec- 
essary for developing and maintaining a maximum 
production. 



18 FINANCING THE PEOPLE 

Labor ought to be capitalized. There is no 
reason for not including labor in any scheme of 
finance. If labor is out of employment it is not 
consonant with civilized government to require it 
to resort to begging or stealing to support the 
family. This new finance might require more de- 
tail in its operations because it would be a finan- 
cial system applicable to the whole population. 

If the government should nationalize the medi- 
cal profession; and these national physicians 
should adopt the policy of selecting the strongest 
and most healthful ten per cent of the population, 
and give to them all medical attention, the plan 
would, at once, be pronounced as a farce — that is 
American finance. The ten per cent who are finan- 
cially strong and healthy, and could, therefore, get 
along measurable well without assistance, get 
practically all credit, while about 80 per cent who 
are financially weak and, therefore, need help, are 
denied it. 



CHAPTER II 

THE FUNDAMENTALS OF AN ADEQUATE 
SYSTEM 

If the present financial system is insufficient 
it is well for us to determine what are the requi- 
sites of one that would meet the present-day needs 
of business and industry. There are certain ax- 
ioms which, if properly understood, will mate- 
rially assist in arriving at an unquestioned conclu- 
sion. These axioms will first be presented. 

First. No business or industry can operate suc- 
cessfully, under present conditions, without ade- 
quate capital. 

Second. Every business and industry, there- 
fore, in order to be of the greatest good to the 
country, and succeed individually, must have the 
necessary support and financial backing. 

Third. The financial system which the gov- 
ernment establishes is the one to which all busi- 
ness and industry must resort to get the neces- 
sary operating financing; and when this system 



20 FINANCING THE PEOPLE 

fails an individual or concern of any kind success 
is not probable. 

Fourth. Small enterprises are as deserving of 
favor in the extension of this financial support as 
are the large corporations. 

Fifth. A financial system then should be one 
to which all could go for assistance in times of 
stress. 

Sixth. Since the life of every business and 
the happiness of the whole people depend upon the 
workings of the financial system, it should not be 
subject to the control of any set of men or organi- 
zations; but it should be so adjusted and regu- 
lated that every individual can participate in its 
benefits to the extent of his faculties. 

The correctness of these axioms will hardly 
be questioned by any one, and they show the im- 
plicit dependence of private and corporate success 
and growth upon the system of finance which the 
government provides to supply their needs and 
requirements. The financial system is the great- 
est and most important part of organized govern- 
ment. I will not even except the criminal stat- 
utes. A community can organize and provide pro- 
tection against the outlaws, but it cannot over- 
come the withering and blighting influences of an 
inadequate financial system. The prosperity and 
happiness of every individual, and the success of 



AND ABOLISHING CRIME 21 

every enterprise, are dependent upon the estab- 
lishment of a proper financial system to which all 
may go for their succor and strength and those 
life-giving qualities, which it alone can give, and 
without which assistance every enterprise must 
perish. 

If the government should establish a system of 
canals, throughout the country, for the purpose 
of furnishing the farmers with an irrigation sys- 
tem to water their crops in times of drouth, the 
mere establishment of such a system would be 
wasted effort unless there followed proper regu- 
lations for the distribution of the water to the 
farmers in time of need. Merely excavating the 
ditches and canals and turning the water into 
them would not make it an adequate irrigtation 
system, however, elaborate it might be in descrip- 
tion. To make it a success there must be some 
provision for distributing the water to all parts 
of the canals so as to save the crops from the 
withering drouth and burning heat. The regu- 
lations for the distribution of the water are as im- 
portant as the system of canals, for without dis- 
tribution of the water it would simply be a skele- 
ton system of canals and the irrigation would be 
^irely lacking — it would be a canal system and 
not an irrigation system. 

Then again, a few men of large capital, might 



22 FINANCING THE PEOPLE 

pay a stipend to the receiver of the water at the 
"in-take" of the system and thus induce him to 
deliver the entire water supply of the system to 
them for their own private use, and, thereby, 
cause a total loss of all farm crops beyond the 
limits of the holdings of these large capitalists. 
The small farmers must have a year of want and 
hardships and privations, and begin the next 
year's operations under oppressive difficulties and 
with a shortage of funds due to the crop failure 
the previous season. 

But with the new season the capitalists again 
inform the keeper of the "in-take" that they can 
use all water which is furnished to the system of 
canals, and that they will pay him the established 
price so that he need not bother with that innum- 
erable list of farmers who clamor for their share 
of the water in order to save their crops from 
ruin, and who could afford to buy water in very 
small quantities only. This keeper of the "in- 
take" being a business man quickly decides upon 
his method of procedure. He can see no reason 
for bothering to distribute the water to millions 
of individuals and then employ a large list of col- 
lectors to get the pay for this water so widely 
distributed. So he does the sensible and busi- 
nesslike thing and turns all water of the entire 
system into the holdings of the large capitalists 



AND ABOLISHING CRIME 23 

who will pay cash and thereby saves the bother of 
keeping a long list of accounts, and entailing a 
heavy expense in their collection. Of course, he 
sees only his interest in the transaction. The 
fate of the farmers who are denied water is a mat- 
ter of no concern to him. He is not to assume 
their troubles when he can so easily avoid them, 
and at a largely increased income to himself. If 
the water passes through his control it would be 
the acme of absurdity to refuse to turn it to where 
it will net him the larger profits at greatly re- 
duced expenses and trouble. To refuse to accept 
this offer of the capitalists would black-list him 
in the business circles and catalogue him among 
the weak-minded philanthropists. His reputation, 
business success, as well as his personal income, 
forces him to disregard the plea of the millions 
of farmers and confine his dealings to the few 
large capitalists who can easily handle his entire 
water supply. The visionary idealists may con- 
demn him for adopting this course; but it is hu- 
man nature, and people must be dealt with as hu- 
man and expected to do the natural things. The 
keeper did what the business men generally would 
have done, and are doing daily. Under the ar- 
rangement the capitalists enlarge their holdings 
and grow enormous crops and experience unbound- 
ed prosperity; the small farmers, who are denied 



24 FINANCING THE PEOPLE 

a participation in the distribution of the water, 
must close down and quit business. Under such 
a system of canals — for it is not an irrigation sys- 
tem they are under — the small farmers cannot 
compete witli the large capitalists who are freely 
extended an abundance of support in times of 
need and, therefore, these small farms cease to be 
economic factors in supplying the needs of the 
American people, and the whole field of agricul- 
ture becomes monopolized by the few large con- 
cerns who receive all the benefits of the legisla- 
tion in behalf of the farming industry, and with- 
hold even a modicum from their small competi- 
tors. It is quite apparent that this irrigation sys- 
tem extended only as far as the water went in the 
canals. The people who lived on the canals be- 
yond the water supply, certainly cannot be said to 
have lived on an irrigation system, however exten- 
sive the canal system may have been. 

THE FINANCIAL CANALS 

The United States has established a skeleton 
system in which is placed the money and credits 
of the whole nation. The banks and financiers are 
the channels through which all credits and monQy 
must pass in being distributed to beneficiaries. 
These financiers may dispose of these moneys and 
credits at their option and in such way as to net 



AND ABOLISHING CRIME 23 

them the largest incomes, and no complaint 
against an unequal and unjust distribution will 
meet with any consideration at the hands of the 
government, for the government has turned the 
whole control of the credit over to the financiers. 
The government has established a system, and 
provided so that all money and credit shall auto- 
matically pass into this system, but where it goes 
from there the government refuses to say. If the 
system refuses to release any of this money and 
credit into business circles, it has the option of 
doing so, and it thereby can shut down every bus- 
iness and industrial institution in the land, and 
the nation and the public would be perfectly help- 
less to defend themselves. The business and in- 
dustry can prosper only to the extent that this 
system releases this money and credit to produc- 
tive enterprises and to the enterprises which dis- 
tributes the commodities among the people. And 
as a natural corollary only the enterprises among 
which these financiers distribute this working as- 
set, called money and credit can operate success- 
fully; those from whom it is withheld must im- 
mediately cease all activities where capital enters 
as an important factor. 

The statement that all money and credits must 
pass through this established system conveys a 
very indefinite idea to a large portion of the pub- 



26 FINANCING THE PEOPLE 

he. It is understood that all money, or practically 
all, is in the hands of the banks and financiers, but 
the credit is looked upon as something invisible, 
intangible and therefore inconsequential. 

CREDIT WEALTH 

The wealth of the United States consists of 
two general classes; tangible and intangible. The 
tangible wealth includes all material, visible prop- 
erty, such as lands, buildings, equipment, machin- 
ery and merchandise. All material wealth is es- 
timated to be worth about $200,000,000,000. There 
is another $200,000,000,000 valuation in the credit 
wealth. That means that the total amount of pri- 
vate and public loans that it would be safe to make 
on the present tangible wealth is $200,000,000,000. 
This latter wealth, as a factor in production and 
distribution, is worth many times more than the 
total material property of the country. It seems 
unreasonable to assert that $200,000,000,000 of 
credit wealth will accomplish much more than that 
amount of material or tangible wealth, and yet to 
get the proof it is only necessary to analyze busi- 
ness and industry. More than 95 per cent of the 
business of this country is done through that part 
of wealth which we call credit. It moves nineteen 
times as much business as cash does and it moves 
many times more than cash could. If a few cap- 



AND ABOLISHING CRIME 27 

italists want to launch a new enterprise and have 
$1,000,000 cash to start with, they will put prac- 
tically the whole amount into lands, buildings, ma- 
chinery and equipment; and they will depend on 
their credit to finance the operations of the en- 
terprise. With the million dollars of material 
wealth they will probably have in excess of that 
amount of credit with which to operate the busi- 
ness. And, as stated previously, this amount of 
credit will transact many times the business that 
the same amount of cash would. This may be il- 
lustrated in this way: 

If a concern has $1,000,000 invested in a plant, 
well equipped with every necessity for a modern 
establishment of its kind, and then has no credit 
nor operating capital, the plant is a worthless 
piece of property until it gets that magic force 
called operating capital to put it in motion. This 
operating capital may be cash or credit, or both. 
If the concern has cash and no credits its business 
will be confined to what it can do on a cash basis, 
and the amount of business that can be done with- 
out credit is so small that very few enterprises 
can long survive by operating on a strictly cash 
basis. It is true that many firms claim to operate 
on a cash basis but, instead, they have the very 
best of credit and use it to the maximum. Sup- 
pose that a firm in New York has a capital of 



28 FINANCING THE PEOPLE 

$100,000, and its trade will consume 100 carloads 
oi goods per month. The goods which the firm 
handles are purchased from California. A wire is 
sent to the California house to ship the 100 car- 
loads the first of every month until further notice. 
The order is accordingly entered and the ship- 
ments are made as requested. These shipments 
will keep the New York company supplied and the 
business will move along very nicely. The com- 
pany has the $100,000 working capital and pays 
for the goods as they arrive. This is called doing 
a cash business. 

Another firm in New York, just by the side of 
the one mentioned, has $100,000 but has no credit 
attribute that it can use ; so it must pay cash. It 
cannot wire for the shipment to come forward. 
The cash must be sent before the goods will move. 
The $100,000 is sent by mail and in due time 
reaches the California house and the 100 carloads 
of goods are shipped. If these cars move with the 
rapidity that characterizes American freight 
movements, namely, 26 miles per day, it is read- 
ily seen that more than three months will inter- 
vene between the date of shipment and the date 
of arrival in New York. This firm's capital is now 
tied up in stock and no further goods can be or- 
dered until this shipment is disposed of and the 
cash received from the sale. It will probably re- 



AND ABOLISHING CRIME 29 

quire at least three months to dispose of the goods 
and collect the cash ready for making another 
order. The company trying to transact business 
on a cash basis turns 100 cars of goods within six 
months; the firm who has the use of the credit 
which belongs to the capital and is really an at- 
tribute of it, has its 100 cars coming every month. 
The credit attribute which this firm is permitted 
to use is bringing in sufficient supplies to keep 
the business moving at normal, while the firm who 
is denied this credit can hardly last in competition 
with the one who may use credit freely. This is 
an exaggerated case, but it is illustrative and 
gives some idea of some of the difficulties of oper- 
ating any business or enterprise without credit 
as an asset. It is difficult to estimate the rela- 
tive advantages of credit over cash as an oper- 
ating agency, but it is probably about as 5 to 1 — - 
one dollar of credit being equal to five dollars of 
cash in moving business. This estimate would 
make the $200,000,000,000 of American credit 
equal to five times that amount of cash as a mov- 
ing agency in business. 

Every dollar of tangible wealth has this credit 
wealth as an attribute. It is a part of the mate- 
rial wealth, though not an inseparable part, ft 
depends upon the material wealth for its exist- 
ence, and, therefore, could not exist without it. 



30 FINANCING THE PEOPLE 

The destruction of the material wealth carries 
with it the credit which belongs to it as an at- 
tribute. The individual who creates and owns the 
material wealth at the same time creates the 
credit wealth and should own it also ; but he does 
not. That credit at once goes into the hands of 
the money monopoly and is subject to their dis- 
position regardless of the welfare of the individ- 
uals from whom it is gathered. As stated pre- 
viously, the financiers have under their control 
and subject to loan, an estimated $200,000,000,000 
of credits. These credits are not based upon their 
own individual material wealth, but upon the com- 
bined wealth of the whole American people. Now 
if this credit could be distributed among the peo- 
ple according to the material wealth owned by 
each it would give all an opportunity to succeed. 
But the owner of this credit wealth, or attribute 
of his property, cannot get the use of it to develop 
his material or tangible property without first get- 
ting the consent of the financiers, and paying them 
for the privilege of using this element of his own 
property. Thus a state may be very rich in farm 
lands. They may produce enormous crops of great 
commercial value. The productivity of the soil 
and value of the crops give the state a high rat- 
ing in financial circles and the business men and 
corporations of the state will be extended great 



AND ABOLISHING CRIME 81 

credit on the strength of the fertility of the soil 
and the value of the annual farm output. This 
credit is largely an attribute of the farms and is 
based upon them and justly belongs to them and, 
yet, they may be denied any participation in its 
benefits. The financiers place the credit where 
they get the largest profits with the least effort 
and expense. Under the present system the ac- 
tive producing and distributing credit wealth is 
placed under the control of less than 1 per cent of 
the population without any restrictions as to its 
distribution. This enables them to sell the whole 
supply of credit to the few large capitalists who 
can pay for and use the entire amount ; and thus 
shut off the individuals and concerns of small 
means from any hope of success in their endeav- 
ors. 

From what has been briefly stated it is evident 
that a financial system to meet the needs of the 
country, adequately and efficiently, should be so 
adjusted as to nourish and support all industries 
with impartiality. It should get under the small 
enterprises and large ones alike, at least to the 
extent of their capital invested. It should be reg- 
ulated so as to supply the needs of the entire 
country and do it without any favoritism or par- 
tiality. It must be remembered that every busi- 
ness and industry are planted on this skeleton 



32 FINANCING THE PEOPLE 

financial system, and when their proportion of the 
nation's finances are cut off or withheld they must 
inevitably perish as would the small farms on 
the irrigation canals without a water supply. 

LIFE AND DEATH PICTURE 

The keepers at the "in-take" of the financial 
system have sold the entire credit supply to the 
large concerns and the small enterprises, which 
are outside of this combination of capitalists, are 
in a dying condition, while these large corpora- 
tions to whom this supply of credit has been sold 
have largely increased their holdings and added 
immensely to their annual profits and their aggre- 
gate accumulated wealth. The fate of the millions 
of small enterprises is no concern of the money 
monopoly. They are operating business purely 
for profit, and the injury it does to others is not 
a controlling factor. The laws permit and encour- 
age this system of handling the finances so as to 
destroy the millions and build up the thousands, 
and no one should be condemned for doing the 
things which the law fosters and encourages. 

It is a well-known fact that not ten per cent 
ox the population can get adequate financing un- 
der the present monopolistic control. Fully 70 
per cent are living on perfectly dry financial canals 
and therefore are cut off from all participation in 



AND ABOLISHING CRIME 33 

the benefits of the arrangement. Another 20 per 
cent are cut off from this supply to the extent of 
minimizing or suppressing their hopes and aspira- 
tions. 

If a concern wants to start a new business, or 
enlarge an established one, get the necessary 
financing to grow a crop to feed the nation, he 
must go to this money monopoly, which ex-Presi- 
dent Wilson says has control of the nation's money 
and credit, and, having the money and credit un- 
der their control they likewise to the same extent 
have the control over all business and industrial 
activities. Business and industry can do only 
what the money monopoly grants a permit to do. 
This permit is granted on the condition that the 
individual or corporation pay to this monopoly 
eight to twenty per cent interest on the amount 
of capital wanted. Thus a few men hold in their 
hands the destinies of a whole nation of people; 
and they are pretending to deflate credit by with- 
drawing it from all excressent enterprises and ex- 
tending it only to those which are deserving and 
beneficial. In the process of elimination the weak- 
lings will have their support withdrawn and the 
large corporation will be given an increased sup- 
ply — and probably at an increased charge for the 
favors. 

John Skelton Williams, Comptroller of the 



84 FINANCING THE PEOPLE 

Treasury, in a statement made public on July 30, 
1920 shows the development of this very condi- 
tion. He said: "I will also add that there is not 
and has not been in my judgment, the least justifi- 
cation for the excessive and burdensome interest 
rates running up to 10, 12 and 15 per cent, and 
higher, which have been exacted by some of the 
bankers in New York, the principal center of the 
country. These excessive interest rates and the 
publicity given them have increased the uneasi- 
ness in financial circles and have been a contribu- 
ting cause rather than a consequence of the up- 
setting of security values, and the unjust rates 
which corporations and others have been required 
to pay in recent months. These banks which have 
charged their customers these excessive rates at 
times, have themselves been liberally accommodat- 
ed with millions of dollars by the Federal Reserve 
Banks at average rates of considerably less than 
6 per cent." 

These banks which have practically killed all 
little business are now applying hard pressure to 
the larger concerns and are threatening them with 
a rate of interest that will, in six or seven years, 
absorb an amount equal to the capital stock of the 
borrowing concerns. This increased interest must 
kill many enterprises which are not able to add it 
to their output and collect it from the public. 



AND ABOLISHING CRIME 35 

Even the Federal Reserve Banks are participating 
in this exploitation of industry. Governor Hard- 
ing of the Federal Reserve Board states that the 
rediscount rates have been increased by the Fed- 
eral Reserve Banks from four and a half to seven 
per cent. He palliates this remarkable increase in 
discount rates by alleging that it is an act of self- 
abnegation of the banks to kill credit and prevent 
increased loans and reduce those already made. 
Governor Harding's theory is that increased in- 
terest rates and decreased capital will increase 
production and decrease prices. We are unable to 
draw the same conclusion from the premise pre- 
sented. If that be sound logic then the merchants 
and manufacturers who pay this increased inter- 
est will increase the price of the merchandise pass- 
ing through their hands and thereby enable the 
retail dealers to buy less and sell cheaper. This 
may be a sound economic theory but it does not 
harmonize with anything found in the books. 
There are two impressive consequences following 
the adoption of this policy; one is that all totter- 
ing, enterprises which cannot give "gilt-edged se 
curity," and pay the increased interest must shut 
down and cease to be industrial or economic fac- 
tors; the other is, that the high mortality rate 
among the small enterprises is bringing the banks, 
as Governor Harding admits, increased incomes to 



3G FINANCING THE PEOPLE 

the extent of millions of dollars. This increased 
income may, in a measure, influence the banker's 
judgment in concluding that the proper way to 
force a decrease in prices of living necessities is 
to increase the interest rates to restrict industrial 
activities. 



CHAPTER III 

CREDIT ACCUMULATES WEALTH RAPIDLY 

Credit transacts business with great rapidity ; 
it also accumulates wealth with equal rapidity. 
Every time a credit dollar is turned in industry 
it nets the owner a profit equal to the margin of 
profit on the turnover of a dollar of actual money. 
And since the credit dollar will work much faster 
than cash, and therefore bring in supplies and ma- 
terial more abundantly than the same amount of 
cash, it is able to withdraw business from the en- 
terprises which must operate without its assist- 
ance, and thus the concern who has the credit will 
not only take the business from the cash concerns, 
but will also take the increased profits which re- 
sults from the increased business. This increased 
profit-taking has resulted in accelerating the ac- 
cumulation of wealth during the past few years 
and has enabled the few to whom the nation's 
credit has been sold by the financiers, to amass 
the bulk of the nation's wealth on one hand and 
pauperize the great majority of the population on 



38 FINANCING THE PEOPLE 

the other. With the wealth congested in the hands 
of the few and the credit, which is a concomitant 
of wealth, in the same control; and a decreased 
wealth and curtailed credit among the many, sets 
up an impenetrable wall between the two divisions 
of a so-called republican people. 

The system has conicalized the wealth of the 
country, and the apex is rapidly extending up- 
ward and the base is as rapidly being reduced in 
dimensions, and the periphery is entirely denuded 
of wealth and credit and is nothing more than an 
abandoned field of enterprises and hopes of sue 
cess. In this periphery, or outer field of industry 
and business, is located more than 70,000,000 of 
America's population who are not living under any 
financial system, since the money placed in the 
system does not reach them. It is sold by the 
keepers at the "in-take" of the system and is not 
permitted to extend to them. This is called a 
financial system. That may be a proper designa- 
tion for the arrangement as far as it goes. The 
ten per cent who are enabled to monopolize the 
entire "in-flow" at the head of the system may 
deem it an admirable system; but the 70,000,000 
among whom it does not function, and who are 
hopelessly cut off from all participation in its ben- 
efits cannot be said to have any financial system, 
however, strenuously such arrangement may be 



AND ABOLISHING CRIME 39 

upheld by the beneficiaries. It cannot be said to 
be a financial system beyond the holding of the 
large concerns who have bought from the keepers 
at the "in-take" the entire supply that enters the 
system. 

THE PRESENT FINANCIAL SYSTEM IS 
IMPRACTICAL 

It is a waste of effort to try to maintain and 
enforce any government policy which is inharmo- 
nious and antagonistic to existing economic con- 
ditions. That is wherein the present financial sys- 
tem is fundamentally defective. It does not har- 
monize with the needs of the people whom it is 
intended to serve. Even the financiers will ad- 
mit that it cannot be adjusted to the class of our 
population most in need of its assistance. This 
condemns it as an impractical makeshift that 
should be replaced by something more practical 
and serviceable. The financiers will contend that 
it is practical as far as it operates. On the other 
hand it may with the same force be contended 
that it is impractical in so far as it does not oper- 
ate. And since its operation is confined to about 
ten per cent of the population and its impractica- 
bility extends to 90 per cent of the people, it is 
practical as a class policy and not as a national 
system. All laws and regulations should be for 



40 FINANCING THE PEOPLE 

the collective body of citizens and if any system 
cannot be extended over them it is not practical 
as a national policy. If its good qualities are ab- 
sorbed by a ten per cent and the other 90 per cent 
must pay the favored few the amount of benefits 
accruing to them under the system, it is a success 
as a class policy and a failure as a national system. 
In the hands of the money monopoly it is a success 
in withdrawing the wealth from the masses of 
the people and congesting it in the hands of the 
operators of the system; it is a failure in so far 
as it cannot be made applicable to more than a 
very small per cent of the population, and the per 
cent to whom it cannot be made applicable are the 
very ones who are most in need of its applicabil- 
ity. It is a good medicant for those needing little 
or no treatment, and a failure for those suffering 
disease and agony. 

THIRTY THOUSAND TOLL GATES 
There are about thirty thousand banks or toll 
gates in the United States. This government is- 
sues money and places in the control of the finan- 
ciers and bankers. This is done in two ways ; one 
way is to deposit it in some banks designated as a 
"sub-treasury," and the other way is to pay it out 
to meet running expenses. In either case it passes 
into the hands of the financiers who use it to spec- 



AND ABOLISHING CRIME 41 

ulate on and who sell it to the public for the trans- 
action of business. Money placed in the "sub- 
treasuries" is virtually a gift to such banks, espe- 
cially if they retain it for a considerable period. 
A million dollars loaned, or deposited by the gov- 
ernment enables the bank in which it is deposited 
to loan three to five times that amount and this 
thereby shortly accumulates an interest that will 
more than pay the original deposit made by the 
government; and thus be equivalent to donating 
the original deposit to the bank. This money 
ceases to be government money when it passes 
out of the possession of the government. It then 
becomes private money over which the govern- 
ment has very little control, and it is entirely un- 
der the control of the financiers and is subject to 
their disposition. The function of money is to 
circulate among the people freely and transact 
their business expeditiously. This is where money 
is denied its function; it is where the welfare of 
the public and country are in conflict with the 
interest and purpose of the banks. 

It is the business of these banks to get the 
money in their possession and hold it until they 
can collect a fine or toll from those who use it. 
This fine or toll is called interest. The banks- 
profits and incomes are limited to the amount of 
such fines and tolls collected. Then, it is to their 



42 FINANCING THE PEOPLE 

interest; first, to get in their possession the larg- 
est possible amount of money, and second, to find 
some one who wants to go into business, or wants 
money for other purposes, and who is willing to 
pay the fine or toll demanded by the bank. This 
applicant for a participation in the benefits of the 
national financial system must belong to the class 
to whom the banks distribute the money or he 
will be denied the opportunity to even pay the 
fine and engage in developing the resources of the 
country. Business and industry pay these tolls 
and fines and take the money out of the banks and 
turn it loose in the channels of trade and com- 
merce, when it is again taken in by the banks and 
held for another payment of 5 to 100 per cent. 
This process is a continuous feature of American 
business and industry. Industry pays the fine to 
secure the release of the money and the banks at 
once draw it in and hold it out of enterprise and 
business until another payment is made to the 
bank. It is a system of kidnapping every availa- 
ble dollar and holding it for ransom. And the 
ransom will not be accepted unless offered by 
some one who belongs to the circle to which such 
favors are granted. Success cannot attend any 
person who is thus denied his share of the Na- 
tion's credit and the credit belonging to his indi- 
vidual property. 



AMD ABOLISHING CRIME 43 

These banks are not wholly detrimental to the 
community in which they are located. They are 
really an arm of the government and are largely 
under its control. The bankers are not necessa- 
rily, bad men because they levy tribute on the bus- 
iness community. They do this under legal en- 
actments and the blame, if any attaches, rests 
primarily on the government which delegates that 
authority to the banking interest; and since the 
electorate are responsible for the acts of their 
government they are likewise responsible for the 
system of assessing fines and tolls against busi- 
ness. This system enables the financiers to direct 
business and industry into certain channels, and 
block it from going into others. The channels in 
which the money is placed must necessarily, be 
the ones in which business will thrive, and the 
ones from which it is withheld must, as necessa- 
rily, be industrially barren. The financiers now 
have business channelled so that it is confined to 
* very small per cent of the population. The 
young man or woman starting in life has the 
whole financial organization to oppose. At every 
turn he finds the financiers throwing out help to 
his powerful adversaries and competitors and 
withholding from him even the credit which be- 
longs to him as a part of his own property. The 
government gives his weapons (credit) into the 



44 FINANCING THE PEOPLE 

hands of the financiers and they sell them to his 
most powerful adversaries to be used against him 
to his utter extermination as a business rival. This 
is an appalling condition, but it is apparent, and 
growing worse yearly. 

FEDERAL RESERVE BOARD CONGESTING 
CREDIT 

The federal reserve board was established for 
a definite purpose. That purpose was to strength- 
en the present financial system and enable the 
banks to increase their loans and thereby increase 
their profits. It was pointed out that the reserve 
system would enable the banks to largely increase 
their credit and at the same time make them safe 
against failures and panics. The system has had 
those beneficial results. It has greatly increased 
the security of the banks against untoward con- 
ditions and saved depositors heavy losses. These 
favorable features are more than counterbalanced 
by the injury the system is doing in its method 
of operation. The law makers seem to have no 
conception of the effect of the legislation which 
they enact, or, having knowledge of the effect, 
have no care for the public safety. Since the 
adoption of the Federal Reserve act the conges- 
tion of credit has been the most rapid ever known 
in the history of the country. It has driven the 



AND ABOLISHING CRIME 45 

small concerns to the wall and the man of small 
means is a financial outcast. 

Whether this was intended or not it is an ac- 
complished fact, and the federal reserve board ac- 
celerated the demise of the Little Man. It was 
done by the adoption of a system of re-discount- 
ing paper. All banks, in accepting paper tried to 
get paper that would be acceptable to the federal 
reserve banks. They did this in order to be in 
line so they could cash their paper if financial 
stress made it advisable. Many banks would ac- 
cept paper with the avowed purpose of passing it 
to the federal bank for rediscount. This is a large 
part of the banking business of the country, ac- 
cepting paper to rediscount in the Federal System. 
The Federal System has certain standards paper 
must measure up to in order to be subject to re- 
discount in the system. The paper must be of un- 
questioned security. The requirements are higher 
than banks generally had adopted; and a very 
large per cent of the customers of the banks were 
either entirely dropped, or their credit at the 
banks materially reduced. The tendency has been 
to rapidly congest the entire credit of the nation 
In the hands of the very few wealthy and to dis- 
seminate poverty more generally among the 
masses. 

While the effect has been to largely expand 



46 FINANCING THE PEOPLE 

the volumes of credit, the increased volume has as 
largely been congested in the hands of fewer peo- 
ple. This consequence followed directly the order 
of Governor Harding to deflate credit. That 
amounted to an order to proceed to killing off the 
weaklings and retaining only the strongest bor- 
rowers who can furnish an "unquestioned paper." 
Naturally, every bank in the process of deflation, 
will retain its best and most valued customers. It 
will not refuse accommodations to its largest de- 
positors and most substantial borrowers to whom 
it can loan in large quantities and with absolute 
assurance of prompt payment. This class of busi- 
ness men will certainly be taken care of by the 
banks and the de-flation will be against the small 
business men and the concerns of unsettled cred- 
its. So the whole trend of the operations of the 
Federal Reserve Board has been in the direction 
of concentratiing the credit of the people into the 
hands of a few men and business and financial 
concerns. This is rapidly emasculating the bulk 
of the population and precludes them from par- 
ticipating in the business, financial and industrial 
affairs of the country except as servants of the 
ones to whom the operating credit of the country 
is delivered. 

As a reserve system, where the small banks 
may go to replenish their money supply when dan- 



AND ABOLISHING CRIME 47 

gerously low, the reserve banks are very helpful 
and as such are beneficial, but they seem to mis- 
take their purpose and have launched a campaign 
of extermination against small enterprises and 
are throwing the business into the hands of the 
wealthy few. If that was the intent of the Fed- 
eral Reserve act it was a sinister and secret one 
for the public was not advised that the new re- 
serve system was to be clothed with such au- 
thority. 



CHAPTER IV 

THE SCIENCE OF MONEY 

People frequently favor a policy because they 
do not understand it; and they as frequently op- 
pose a policy through this same ignorance. It is 
this lack of knowledge of the details of govern- 
ment and economics that has held the world back 
and prevented progress. When civilization adopt- 
ed the dollar as its standard it struck a very low 
level for its ideal attainments. The accumulation 
of wealth was thus made the incentive for per- 
sonal activities, and all else is subordinated to 
financial achievements. Under this civilization and 
economic system man is forced to strive for the 
dollar. He has no option. It is a case of pump or 
drown. Without it he has no friends. If he has 
no money he will suffer. Society is so constituted 
that no one can live without money. It is not so 
much how the money is procured, but the essen- 
tial thing is the having. Economics, industry, 
business and even moral agencies draw no line be- 
tween good and evil money. If the money is pro- 



AND ABOLISHING CRIME 49 

cured at the end of an assassin's gun ; at the sac- 
rifice of virtue and self-respect; or, at the sacri- 
fice of human lives, it is none the less efficacious, 
and passes freely in all trade and business trans- 
actions, and its criminal acquisition adds no de- 
terrent attributes to its circulating qualities. 

There may be laws to punish the criminal for 
the trespass committed in taking the money; but 
when such punishment is inflicted, it frequently 
equalizes it with the circumstance of the parent 
whipping the child for stealing and then taking 
the stolen property and providing the child a mag- 
nificent feast with it. 

The present financial system conceals crime 
and, of course, to this extent encourages it. The 
money in the hands of the criminal carries no 
marks indicating the demoralizing conditions un- 
der which it was received; nor the crimes which 
it may conceal. It has no stamp upon its face nar- 
rating the crime which it consumated. 

The present financial system disorganizes so- 
ciety ; it disorganizes man. Every one is forced to 
have money. He is forced to secure it honestly, 
or dishonestly. If he can get it honestly that will 
be satisfactory ; if he gets it dishonestly that will 
meet the demands of trade and business and pro- 
vide him and his family with the necessities and 
comforts of life. Whichever way he gets it, it 



50 FINANCING THE PEOPLE 

serves the same purpose and provides an equal 
return to the recipient. 

ALL STRIVING FOR THE SAME PRIZE 
The dollar is the prize all are striving for. Every 
one is organized against every other in this con- 
test. It is like throwing a bone to a pack of dogs. 
It disorganizes them, and they turn upon each 
other to the point of taking lives, if need be, in 
order to get the bone. So it is with the dollar. 
Every one has the mind riveted upon getting the 
most of the dollars, and lives that come between 
the individual and this accomplishment are liable 
to be sacrificed — not only are liable to be, but are 
actually sacrificed by the thousands. The contest 
is not limited to honest efforts nor to worthy pur- 
poses. Some win through deceit, some through 
fraud, some steal it, some sell their honor and 
patriotism for it, while some get it through mur- 
der. But, however won, trade and business com- 
mend the victor and extend to him favors com- 
mensurate with the amount of money he has to 
release in exchange for such favors. All of the 
above mentioned systems of getting rich are open 
to every individual, and are a standing temptation 
and invitation to all who are wickedly inclined. 



AND ABOLISHING CRIME 51 

MONEY IS NECESSARY 

This is not an argument against money. It is 
an argument against crime. Money is one of the 
necessities of the world. It is needed as a medium 
of exchange, and it is absolutely necessary for 
that purpose. But it does not follow that its crim- 
inal features must be retained indefinitely. The 
argument is for a money as good or better than 
the present for commercial purposes without any 
of its evil attributes. If an economic and financial 
system can be devised which will compel every 
one to strive for this prize honestly and fairly, 
then this madness and strife among men will be 
largely obliterated, and evil thoughts and schemes 
will be forgotten, and society will be pitched upon 
a greatly higher plane. To know and understand 
the remedies for existing ills one must understand 
some of the primary functions of money, which 
when properly studied will make clear and obvious 
the remedies needed to bring optimism and pros- 
perity to a pauperized and pessimistic people. 



CHAPTER V 

BANKING AND FINANCE 
MONEY 

Money has three functions. It is primarily a 
standard tor measuring prices of commodities, and 
determining the values of all kinds of property 
and wealth. Without this standard of measure 
there would be no method of stating the value of 
anything, and all prices would be unsettled and 
uncertain. Everything of value would be meas- 
ured in terms of some other commodity of unset- 
tled value. If a farm is said to be worth so many 
horses, or kine, or swine, or sheep it conveys a 
very indefinite idea of the value of the farm. 
There is no fixed value from which to calculate. 
The value of the stock used as the standard of 
measure is unknown and gives no satisfactory es- 
timate of the farm value. It is, therefore, neces- 
sary to have some fixed and stable standard of 
measure to facilitate trade and meet the demands 
of business and commerce. The gold standard 
has been adopted by the United States as the 



AND ABOLISHING CRIME 53 

standard of measure in this country. When we 
say anything is worth a dollar we mean it is worth 
as much as the gold in a dollar, is equivalent in 
value to the gold stamped as a dollar. The stamp 
of the government does not increase the value of 
the gold bullion so stamped. It simply declares 
the fact. It states that 25.8 grains of gold is a 
dollar, and is the measure for all values of prop- 
erty within the jurisdiction of the United States, 
The value of the coin would not be lessened if 
melted and the government stamp obliterated. The 
value is intrinsic and is not subject to violent fluc- 
tuation from outside influences. 

Vast fortunes and immense values are meas- 
ured by this small piece of gold, and when any- 
thing is said to be worth ten, one hundred, or a 
million dollars it conveys a very definite under- 
standing of its value. It is understood to have a 
value equal to the value of ten, one hundred, or 
one million pieces of gold of the weight of the 
metal in one dollar. 

Gold has proved to be the most satisfactory 
standard of measure the world has tried. All civ- 
ilized countries have adopted it as their basis for 
money and their standard for measuring all 
values. 



54 FINANCING THE PEOPLE 

MEDIUM OF EXCHANGE 

In the second place money is a medium of ex- 
change. The standard of value is one thing; the 
medium of exchange is another. The gold dollar 
— the standard of value — is no longer used as a 
medium of exchange. It measures the value of 
the property exchanged, but does not effect the 
exchange itself. 

Silver, paper money, bank notes and private 
checks are used as the medium of exchange in all 
business transactions. The value of each of these 
different kinds of money is, in turn, measured by 
the gold dollar, or by the amount of gold con- 
tained in the dollar. 

The medium of exchange transfers property 
from one person to another ; that is why it is call- 
ed the medium of exchange. This medium may 
be real money — gold — or its representative ; silver, 
paper money, bank notes or private checks. A 
private check may be a medium of exchange the 
same as any other kind of money. 

If A has a horse valued at one hundred dollars 
and B has a credit of one hundred dollars at the 
bank, they may exchange these two values by B 
taking the horse and giving A his check for the 
one hundred dollar bank credit. The hundred dol- 
lar check is the medium by which the one hundred 
dollar credit is changed from B to A and the horse 



AND ABOLISHING CRIME 55 

is transferred from A to B. 

There are really two moneys doing service in 
business. One measures the value; the other ef- 
fects the transfer. The gold dollar as a medium 
of exchange is no longer in use, and the larger 
gold coins very seldom make their appearance in 
the marts. 

REDEMPTION MONEY 
A third function of money is its redemption 
features. This is different from the standard of 
value, and from the medium of exchange. It 
really connects the two, the standard measures 
the value of the medium of exchange, and the of- 
fice of the redemption money is to guarantee and 
maintain that value. 

If a check is given for $1,000 that means that 
the drawee is entitled to the equivalent of one 
thousand gold dollars, as defined by the laws of 
the United States. If he cannot be satisfied any 
other way he is entitled to have that value, or 
amount, of gold delivered to him. This makes all 
paper money, silver and checks worth their face 
value in gold. They can be converted into gold 
and are therefore worth as much as the amount 
of gold specified. 

This holds the price and value of all credit 
money at its face, or par value. Without this 



56 FINANCING THE PEOPLE 

redemption money, all credit money would become 
worthless, and the standard of value would have 
no influence in regulating values. Without the 
redemption feature, all money would be worth 
just the value of the material it contained. A 
thousand dollar bill would be worth no more than 
the blank paper on which it might be written or 
printed. The sliver dollar would be worth just the 
same as the silver bullion without any gov- 
ernment stamp affixed. This redemption money 
is the prop that holds up the value of all other 
money and maintains every dollar at an equal 
value. Redemption money is, in the United States, 
gold and silver and is not necessarily coined. It 
may be just gold and silver bullion, or ore, and 
is weighed instead of counted as money when paid 
out in large quantities by the government. 

This redemption money has an intrinsic value, 
that is, it has a certain value without any gov- 
ernment stamp affixed; and its value is, as a re- 
demption money, entirely independent of any such 
stamp. It is not necessarily, a medium of ex- 
change, nor is it always a standard of value, it is 
just uncoined bullion. Although not coined, re- 
demption money is real money and is of equal im- 
portance with the other two kinds. In fact, the 
three kinds, medium of exchange, standard of 
value and redemption money are inter-dependent 



AND ABOLISHING CRIME 57 

and no two would be valuable without the other. 

CREDIT MONEY 

The money most seen in commercial transac- 
tions is credit money. This consists of silver, pa- 
per money, and private checks. More than 99 per 
cent of the country's business is done on checks 
and paper money, and less than one per cent is 
done on coin or metalic money. Less than half 
of this metalic money is gold, or basic money. All 
checks, bank notes and silver are theoretically re- 
deemable in gold and that makes them as valuable 
as if they were that many gold dollars. 

These bank notes and checks have no intrinsic 
value and are therefore worth only what their 
gold redemption gives them. A thousand dollar 
check is really an order for one thousand gold dol- 
lars, or their equivalent; and it is worth that 
amount because it has that value of gold back of 
it which can be obtained if wanted. As a matter 
of fact this is not demanded in ordinary business, 
and gold bullion is seldom seen by the public in 
business transactions. 

This credit money transacts more than 99 per 
cent of the country's business. It is more easily 
handled than the metalic money; and it is, there- 
fore more expenditious in handling business and 
making large transfers of property. A transfer 



58 FINANCING THE PEOPLE 

of property involving a payment of several mil- 
lion dollars of gold would be cumbersome and 
would act as a brake on business. The bulk of 
such money precludes its use in present-day busi- 
ness affairs. 

Some economists class this credit money as a. 
representative of money, and not as a real money 
itself. But it is the real medium of exchange- 
transacting substantially the entire business of 
the commercial world. The fact that it lacks one 
of the attributes of money — intrinsic value — does 
not deprive it of its rating as money. Even basic 
money (gold) could not be rated as money if it 
had to perform all functions of money in order to 
be so rated. Business has outgrown gold as a cir- 
culating money. Present business could not possi- 
bly be transacted with gold and silver as the cir- 
culating medium. This of necessity has develop- 
ed the credit money which has proved to be so 
much more efficient and expeditious in handling 
business that it has driven all gold and silver out 
of all large business transactions, and they are 
now used almost exclusively as a redemption, or 
reserve money. 

BANK DEPOSITED 

Bank deposits are deposits of credit rather 
than specie. There is more than thirty times as 



AND ABOLISHING CRIME 59 

much credit deposited in the banks as there is 
specie in the United States. The bank deposits 
amount to something like $30,000,000,000 and the 
total specie in banks exclusive of the Federal Re- 
serve Banks, is less than $1,000,000,000. More 
than 95 per cent of these deposits are made by 
private checks and are therefore deposits of credit. 
It is very apparent that government money plays 
a very infinitestimal part in the great business 
operations of the present. Very little government 
money is now used in a business way. Even bank 
notes, which are in reality nothing more than the 
private checks of the bank issuing them, do a very 
small part toward handling the country's business. 
Private checks have increased in favor with all 
lines of business until they are now doing more 
than 95 per cent of the total business of the Unit- 
ed States. 

DEPOSITING CREDITS 
Paying with a check is so much easier than 
any other method that it has been almost univer- 
sally adopted. The drawee of a check presents it 
to the bank for payment ; and if he is a customer 
of the bank, the payment is made by having his 
account credited with the face value of the check. 
If the check is for $1,000 he deposits the check, 
and that amount of credit is transferred from the 



60 FINANCING THE PEOPLE 

drawer's account to the account of the drawee, or 
depositor. 

This depositor may, in turn, draw a check in 
favor of some one else for the amount of the de- 
posit, and by so doing transfer his credit to an- 
other. This credit may, and, probably will be 
passed to a number of other persons without a 
dollar of any other kind of money being handled. 
One hundred dollars of credit may, in this way, 
be the medium through which thousands of dol- 
lars worth of property will be exchanged during 
the year. 

ONE BANK 

As long as the money is left in this bank the 
process is a very simple and, at the same time, a 
very safe method of handling the finances. All 
checks against the deposit simply transfers the 
credit on the bank books from one person to an- 
other. The bank does not gain nor lose anything 
through the numerous transfers of credit among 
its customers. It retains the deposit and suffers 
no loss of funds. The credit may be transferred 
from A to B, B to C, C to D, D to E, E to A and 
so on, and no cash payments demanded. As long 
as this plan continues everything is all right. 



AND ABOLISHING CRIME 61 

EACH BANK A LITTLE MONEY SYSTEM 
The bank is a little money system within it- 
self, which, if it could prevent any money from 
going out, would be safe. But there are thirty 
thousand of these little systems in the United 
States. They are the pools in which the entire 
money supply is kept. Sometime when checks are 
given on one of these pools the money is taken 
out and placed in another pool. This lowers the 
money supply in one and increases it in another. 
This is frequently carried so far that one pool will 
be checked dry — all money will be taken out. Bank 
failures result and depositors and stockholders 
lose and are sometimes ruined financially. 

If there were only one banking system in the 
United States and the near 30,000 banks were all 
part of one system, this unfavorable condition 
could not occur. There would be no transferring 
funds from one bank to another. A deposit in 
any one would be a deposit in all, and a check on 
one would be a check on all. If the system had a 
sufficient reserve, every bank in the country 
would be secure, it would rest on that reserve. All 
of them would have a common pool from which to 
get their money supply. The money checked out 
of one bank and deposited in another would be 
placed back in the same pool from which it was 
taken and a lowering of the reserve would not 
occur. 



62 FINANCING THE PEOPLE 

MONEY EBBS AND FLOWS 
The bank at Wichita has deposits amounting 
to $50,000,000. This is sufficient to meet the de- 
mands of the surrounding community. As long 
as this amount remains there Wichita is prosper- 
ous, labor is employed, the farmers have a mar- 
ket for the immense wheat and corn crops pecu- 
liar to that locality, and all business is in a flour- 
ishing condition. Checks are drawn on the Wichi- 
ta bank amounting to $25,000,000. The drawees 
of these checks are not customers of the bank. 
They lift $25,000,000 out of that pool and take it 
to New York and place it in another pool. This 
has lowered the working credit of the Wichita 
community just half. Business comes to a stand- 
still, labor loses employment and farmers cannot 
move their crops. This is called a scarcity of 
money. It happens frequently. 

Sometimes one locality will have a scarcity of 
money and sometimes it will be another. The 
money becomes congested in one place and large 
sections of the country will be without an ade- 
quate supply. To relieve this stringency the gov- 
ernment will load a car with money and send it 
to these districts to help move the crops and start 
business to moving at normal speed. 

The money supply is continually changing from 
one section of the country to another. It lacks 



AND ABOLISHING CRIME 63 

stability and elasticity. It ought to be sufficient 
to transact all business and do it without draining 
any other section of its necessary requirements. 
A proper money system is one that may be drawn 
upon to maximum requirements by every section 
of the country and not be exhausted, or be drawn 
upon heavily by one section without draining any 
other. That would be an elastic, and at the same 
time, an adequate system. 

Back to the Wichita bank. If that bank had 
been a part of one system, the $25,000,000 of 
checks on it would not have been felt. They would 
have been checks on the New York bank just the 
same as they were on the Wichita bank, and they 
would have been deposited in New York, or pre- 
sented there for payment, without requiring cash 
from the bank at Wichita. All that would have 
been transferred from the Wichita bank to the 
New York bank would have been the $25,000,000 
of credit. This would not have caused any short- 
age of credit at Wichita, since the whole credit of 
the entire system is subject to check at all places. 
The whole national deposits are subject to check 
at Wichita, or New York, or San Francisco. They 
are all checking on the same pool and depositing 
in the same pool. A deposit made in New York 
would be equally a deposit in New Orleans, San 
Francisco and every other branch of the system. 



64 FINANCING THE PEOPLE 

It is not a deposit in any one local bank. It is a 
deposit in the system and swells the deposits 
equally in every bank of the nation. 

A SPECULATIVE SYSTEM 
The business of the United States approxi- 
mates, if it does not exceed $25,000,000,000 
monthly. For the sake of safety I will place it at 
$5,000,000,000 per week. Checks aggregating 
that amount are drawn for payment every week. 
Credit or money is taken from some banks and 
placed in others. There is a constant strife among 
these banks to hold individual deposits above dan- 
ger line and avoid bankruptcy. Each tries to keep 
as much money in its own vaults as possible. 
Every dollar in cash on deposit in the bank en- 
ables it to loan three or more dollars at interest, 
thus making it secure and enabling it to reap a 
profit at the same time. This money is carried 
around the country from one bank to another, and 
from one city to another at great expense. 

The money supply is constantly changing from 
one section of the country to another in turmoil 
and agitation. When it recedes it carries wreck 
and ruin to all lines of business. Commercial fail- 
ures, falling prices, money famines, lack of employ- 
ment are all the offspring of this system. The en- 
tire system is speculative, and the speculators use 



AND ABOLISHING CRIME 65 

it for all it is worth. The banks and speculators 
play ball with the money supply and it is tossed 
back and forth regardless of the country's needs. 

Very few people realize the extent of the spec- 
ulation in our money supply. Very few people 
realize that there is an incessant warfare be- 
tween the banks and business. Their interests are 
deimetrically opposite. Money is intended to cir- 
culate freely so as to transact the largest possible 
amount of business. This is what business needs 
and wants. It is what the banks try to prevent. 
They do not only try, but actually do prevent the 
free circulation of the nation's money. They try 
to chase every dollar out of business into the 
banks. Once they get it into their possession they 
try to hold it till business pays a tribute to re- 
lease it. They have manipulated the finances un- 
til they have reduced the American people and in- 
dustry to an absolute dependence on them. The 
money on which this tribute is paid and taken out 
of bank control, automatically goes back to be as- 
sessed another tribute, or interest charge. 

The banks are directly collecting tribute on 
something like $30,000,000,000. Before the World 
War the banks and allied interest were collecting 
interest on near $100,000,000,000. This amount 
has probably been increased until it now ap- 
proaches $150,000,000,000. The amount of inter- 



66 FINANCING THE PEOPLE 

est, or tribute, collected on this money is enor- 
mous. It would consume the total money supply 
several times a year. Every dollar in the United 
States is carrying thirty or forty interest charges 
or tribute levies. 

The speculation in money is one of the great- 
est speculations in the world, it is one that does 
the most injury to labor and business. 



CHAPTER VI 

THE POOL SYSTEM 

The government has tried to remedy some of 
the evils of the present financial system by estab- 
lishing twelve large pools, in which are gathered 
large quantities of money, to be used to meet the 
financial needs of the district in which each is lo- 
cated. These pools are called reserve banks. This 
system concentrates the money supply very large- 
ly in these twelve pools where it is more readily 
available for distribution to the surrounding dis- 
tricts. Hundreds, and probably thousands of 
banks, will draw their money supply from the 
large pools in their respective districts. This, in 
a measure, facilitates the distribution of money 
for business by having a large reservoir of money 
near where banks can go to replenish their inade- 
quate stock. This also reduces the costs of trans- 
porting money from place to place, but does not 
entirely remove the expense. Nor does it stabil- 
ize the money supply, nor the country's business. 
The tendency, though, is in that direction. It rec- 



68 FINANCING THE PEOPLE 

ognizes the superiority of the unified pool and 
takes a step in that direction. 

The fact is that business and commerce have 
so outgrown the financial machinery that there is 
no way to adjust them so they will w T ork harmo- 
niously together. The existance of 30,000 banks, 
or speculative systems, trying to kill the money 
as a circulating medium, and taking every possi- 
ble dollar from business and holding it inactive 
until a heavy tribute is paid, is incompatible with 
a high degree of prosperity and a maximum de- 
velopment of American industry. 

When a new system of finance is sought the 
bankers are the ones consulted. They try to patch 
up the old antiquated machinery and adjust it to 
modern-day business conditions without losing 
their hold on the nation's money supply. They 
try to eternize the old system of speculation, stag- 
nated business and tribute levies. As now organ- 
ized the entire money supply is in the control of 
the money monopoly, and no new business can be 
started, old business enlarged, or the country's 
prosperity promoted without the consent of this 
monopoly, and then only by paying the heavy 
tribute demanded, and calling it interest. 

Money has been debased as a medium of ex- 
change and is used now more as a commodity for 
speculation than it is used as a money. It is in 



AND ABOLISHING CRIME 69 

the hands of speculators more than it is in the 
hands of business. Every dollar has ten or more 
strings to it, and one end of these strings is in 
the hands of the money monopoly. Every time a 
dollar goes out one of these strings will pull it 
back where an effort will be made to attach an- 
other string before letting it go out again. As 
now tied, every dollar would have to go through 
the monopoly's hands ten or more times to unravel 
the tangle it is now in and pay the pawn that is 
now held against the money supply. 

THE UNION BANK 

The most simple system of finance that can be 
devised is the best one. It is not the best be- 
cause it is the simplest, but this is an instance 
where the best and simplest coincide in one plan. 
The plan is intelligible to every person of ordinary 
comprehension. All complexities are left out. It 
requires no experiment to understand its effect on 
business. It is a system that is self-explanatory 
and convincing. All speculation is eliminated; 
therefore, it will have the opposition of the spec- 
ulators and the sordid financiers. 

The Federal Reserve Bank system is now rec- 
ognized as being a great improvement over the 
old system, in the matter of expediting business 
and avoiding stringencies. It concentrates large 



70 FINANCING THE PEOPLE 

quantities of money in twelve pools and if any of 
the 30,000 small pools, or banks should be checked 
dry they can replenish their reserve from the 
nearest large pool. This saves some time and 
some cost of transportation and may be the means 
of preventing a bank failure. If one of the large 
pools should be checked dry, or even low, it can 
De re-filled from one of the other large pools. 

The plan is to shift the nation's money from 
one of these large pools to another as their needs 
demand and thereby maintain the money in each 
at about the same level. This money in the large 
pools is, in turn, shifted to the small pools or 
banks as their money supply runs low. This re- 
quires the shifting of money from one large pool 
to another and from the large one to the small 
ones to maintain something of an equilibrium in 
the money supply, and keep it distributed to all 
parts of the United States. This system, though 
an improvement over the old, retains the agitating 
system, the turmoil, the speculation, the strife, 
and the near 30,000 opposing and contending sys- 
tems, with no general rules for regulating dis- 
tribution among industries needing financing. 

ONE SYSTEM 
A banking system that has only one reservoir, 
or pool, with all banks attached to that pool would 



AND ABOLISHING CRIME 71 

be a great improvement over the Federal Reserve 
.system. All deposits would be made in one pool 
or system and all checks would be drawn on that 
one system. Instead of having 30,000 banks, or 
twelve large Federal Reserve banks with as many 
different systems, the whole should be consolidat- 
ed into one bank to be known as something like 
the Union Bank or The National Bank. Every 
bank would be resting on the same reservoir. 

If the total reserve fund of the United States 
amounted to $3,000,000,000 every bank would have 
that amount of reserve back of it. It would not 
be proper to say every bank, there would be only 
one bank, but it would extend into every city of 
the United States. Any financier will recognize 
the benefits that would result from a consolidation 
of all banks into one system and have the total 
reserve back of every one. 

A NATIONAL MONEY SYSTEM 
There are a number of reasons, and forcible 
ones — for the government ownership of the bank- 
ing and finance. Money is the blood of commerce 
and business, and its free circulation is indispensa- 
ble to a healthful business condition. Since the 
business and success of every person in the United 
States depends upon an adequate money supply 
available at all times, this money should be under 



72 FINANCING THE PEOPLE 

government control, and taken out of the hands 
of speculators. The happiness and success of no 
individual should be entirely in the control of per- 
sons or organizations adversely interested. Such 
is a condition of servitude incompatible with re- 
publican institutions. 

The government is interested in the welfare 
of every individual financially, mentally, and mor- 
ally. Every individual who creates wealth for him- 
self, creates the same amount for the state. The 
wealth of the nation is nothing more than the ag- 
gregate wealth of the individuals. It has no 
vvealth of its own, yet, it has the wealth of all. 
The combined accumulations of all the people con- 
stitutes the wealth of the nation. It is, therefore, 
v^ery important to have the finances handled in 
such way as to get the greatest annual production 
of wealth. The maximum production of the Unit- 
ed States has never been attained because the 
financial system was inadequate and the financiers 
would not permit it. The possibilitiees are double, 
or treble actual attainments. This comes from 
the fact that there are more brain and energy idle 
than are employed. Not half of the brain and in- 
telligence are in actual use. They cannot work 
successfully without the necessary tool — money. 
All productive brains cannot get the necessary 
financing, and brains without money to back them 



AND ABOLISHING CRIME 73 

are useless as productive economic forces. 

Farmers and productive labor cannot get the 
financing to produce wealth. The speculators keep 
the money among themselves to speculate on, and 
labor and farming are not admitted to participate 
m the distribution in the scheme of financing the 
country's enterprises. The farmer must grow his 
crops with insufficient equipment, and his produc- 
tion is small on a short acreage. 

Labor must continue to add to his and his 
country's wealth a minimum production because 
tiie money is all in the hands of the speculators 
and none available to finance his plans and back 
his intelligence. To meet these conditions and 
take the circulating medium out of the hands of 
the speculators, and place it where it will be avail- 
able for use in producing individual and national 
wealth, the government should take control of the 
money supply. 

The government should nationalize the entire 
financial system and take over all banks and every 
financial institution receiving deposits and loaning 
money. It is a national scandal that the money 
supply is so degraded into a speculative commo- 
dity and killed as a circulating medium. The only 
vay to raise it from those speculative influences 
is for the government to take control of it. 

The argument against government ownership 



74 FINANCING THE PEOPLE 

seems conclusive when applied to some lines of 
business, but finance is not in that list. Money is 
made by the government. It is intended to facili- 
tate trade and commerce, and accelerate the in- 
crease in individual and national wealth. To ac- 
complish this it must work where wealth is pro- 
duced. It must assist in producing the wealth. 
As now manipulated, the money is held away 
from productive enterprises. It is used almost ex- 
clusively by the speculators to absorb the wealth 
after it is produced by labor with inadequate 
funds and under great difficulties. Then again, 
anything that every individual in the nation is in- 
terested in, and governed by, should be regulated 
by them. When anything less than all of the peo- 
ple are interested in any line of business or enter- 
prise, it may be well for the government to refrain 
from participating in its operation. The govern- 
ment should not indulge in factional controversies. 
But when every citizen is vitally interested in a 
policy it is incumbent upon the government to at 
least make such regulations that no citizen can 
be unjustly deprived of a chance to live. 

No business would be easier taken over by the 
government than banking. There is already es- 
tablished a nucleus for such a system. The Pos- 
tal Saving Department of the government cou^ 
be very easily expanded into a general banki ig 



AND ABOLISHING CRIME 75 

system; or independent banks could be establish- 
ed, if deemed advisable. Every town that now 
has a bank, or needs one, should have bank facil- 
ities under the new regulations. At first it might 
be advisable to take the banks just as they now 
exist, and run them according to present regula- 
tions until they could be consolidated, where there 
are two or more in the same town or city. Under 
chis plan the government would step in and take 
charge of the whole banking machinery — money, 
deposits, debts and credits of all kinds. There 
vvould be no jar felt in business aside from that 
felt by the bankers. Those having deposits would 
go right along giving checks, and those owing the 
oanks would pay to the new management. There 
might not be any change in the personnel of the 
banks. The same clerks and employees could be 
retained in the management until some would nec- 
essarily be crowded out in the process of consoli- 
dating two or more banks into one. 

The banks would be operated substantially as 
they are now. They would receive deposits, make 
loans, give bills of exchange and do a general 
banking business. They would, though, be purely 
government banks, and a deposit with one would 
be a deposit with the government This would 
end forever the loss of deposits through bank f ail- 
arees. This would guarantee safety to millions 



76 FINANCING THE PEOPLE 

of depositors which fact would also encourage ac- 
cumulation and thrift since there would be no f ear 
of losing money on deposit with the government. 
Security is one of the first considerations in any 
banking system and on this point there can be 
nothing offered superior to the plan proposed. 

EFFICIENCY 

Efficiency comes next to security. Any finan- 
cial scheme to meet present requirements must be 
efficient. Will the proposed plan handle business 
as well as the present? Will it develop the coun- 
try as rapidly as the present? These are ques- 
tions for mature consideration in any proposed 
change in government and laws. A comparison 
of the proposed with the present plan will easily 
reveal their relative merits and show the new 
finance as a working giant as compared to a mum- 
my which represents the remains of a system long 
since deceased. 

The present financial system has completely 
collapsed. It has fallen down at the points where 
its strength was most needed. It has not only 
held the money where it cannot produce wealth, 
but has permitted it to degrade into a commodity 
for speculation, and worse still, it accumulates the 
wealth it persistently refused to produce. It has 
ceased to function as a money any more than 



AND ABOLISHING CRIME 77 

bonds on the Board of Trade are money. It is 
bought and sold just like bonds and other securi- 
ties. It is sold for 5, 10, 20, 50 or 100 per cent 
profit. It is then placed right back in the bank 
and resold. This is repeated several times in the 
course of a year. In this way money is drawn 
from production and withheld from wealth pro- 
ducing to be used for speculation and to sell on 
the markets. Capitalists place several times as 
much money on the speculative markets as they 
do on wealth producing. More than 80 per cent 
of the people get little or no benefit from the pres- 
ent financial system. It is all right among the 
speculators, but it will not get down and do the 
heavy work required to produce wealth. Capital- 
ists are not using money to assist production; 
they are placing it on the market to sell, and to 
sell to capitalists and not to labor. 

The world is crying for more food. The Amer- 
ican people are pleading for an increased produc- 
tion of foodstuffs. The farmers have the land and 
the brains but do not have sufficient funds to 
finance a large crop. They go to the bank to get 
the necessary money to buy the seed to plant the 
crop, or to buy a team, or buy fertilizer, or hire 
labor. They are informed that the banks do not 
loan money on farms; that their security is not 
sufficient, probably ample but not liquid, and that 



78 FINANCING THE PEOPLE 

some capitalist must sign their paper to make it 
acceptable to the Federal Reserve Bank, or, that 
the farm crops might fail thereby enforce a long- 
delay in making payment. The risk is all on the 
side of the farmers; the security and profits on 
the side of the banks. Under these circumstances, 
do the farmers have any financial system ? There 
are fully 80 per cent of the population of the 
United States as devoid of a financial system as 
are the farmers. Even among the other 20 per 
cent there is no financial system. Money is just 
a commodity to buy and sell. This is the kind of 
financial system the country is dragging today, 
and it constitutes a heavy load. What is needed 
is a financial system that is not too proud to work ; 
one that will pull off its coat, throw down its kid 
gloves and get down and dig if necessary to pull 
the farmers through a tight place. It should be 
willing to go with them through sunshine and 
rain, over the top, or through the slough of de- 
spond. The help the farmers should have is that 
extended when they are down in the slough. When 
they need a lift they should be able to get it. That 
would mean something to the farmers and it would 
mean much to the collective body of consumers 
whose interest should always be a factor for con- 
sideration. Such a financial system would reach 
the farmers and enable them to double or treble 



AND ABOLISHING CRIME 79 

their annual production and increase the nation's 
wealth that much. Under the present arrange- 
ment the banks will finance big business to the 
full value of the capital invested. A million dollar 
company can frequently borrow that amount of 
money. The farmers with $60,000,000,000 capital 
and 35,000,000 population have no rating with the 
banks and it is difficult for any to get the neces- 
sary accommodations when needed. 

The Union system should be an impartial one. 
Every dollar's worth of property that is valuable 
to tax should be valuable as security. Every citi- 
zen owning property should have credit at the 
bank equal to, say 50 per cent of the taxable value 
of such property. The government might, under 
proper arrangements, loan more than 50 per cent 
of the taxable value of the property, but such ex- 
cess loans should be call loans, so that the gov- 
ernment when deemed advisable could call in all, 
or part, of the loans in excess of 50 per cent of 
the value of the security. 

Labor should also be capitalized. Then, when 
a man is out of employment he can find support 
for himself and family until employment is open 
to him again. 



CHAPTER VII 

IS IT PRACTICABLE? 

Anything to possess merit in industry and 
finance must be practical. If not practical it is 
lacking in utility and is therefore worthless as an 
industrial factor. The proposed plan of banking 
and finance must conform to these requirements 
in order to receive public approval. The banks 
and financiers handle the credit of the American 
people ; or of the nation, or of the individuals con- 
stituting the commonwealth. Under whatever 
classification it is placed it means the same thing 
— the credits existing within the limits of the 
United States are bought and sold by the finan- 
ciers as a money-making business. The credit of 
the United States is estimated to be in the neigh- 
borhood of $200,000,000,000. That is, the total 
public and private loans that it would be safe to 
extend could not exceed that limit. As the loans 
approach this limit their safety becomes less cer- 
tain. 

Professor Seager of Columbia University, in 



AND ABOLISHING CRIME 81 

his excellent treaties, "Principles of Economics," 
contends that credit is not capital. This conten- 
tion, in a technical sense, may seem true, but in 
a general and broader sense is evidently erron- 
eous. Anything, whether tangible or intangible, 
which can be placed on the market and sold for 
value is, in the broad sense, capital; and when 
used for the purpose of fostering business and 
operating industry it clearly becomes capital in a 
restricted or technical sense. If credit is such as 
can be used, and is used, it, to that extent, be- 
comes capital without any limitations. 

If a business has $100,000 in money, and 
$100,000 of credit, and they are both used with 
the result that a $200,000 product is developed 
from their combined efforts, Why is not one as 
much a working capital as the other? 

Professor Seager, in Principles of Economics, 
page 351, discussing credit states: "But no com- 
munity uses standard money alone as its medium 
of exchange. The credit of the government is 
called in to give currency to token and credit 
money. Where banking is developed, bank credit 
also serves on a vast scale as a medium of ex- 
change. Can this credit which so largely takes 
the place of standard money in modern business 
communities be properly included under the defini- 
tion of capital? If not, what service does it reiv 



82 FINANCING THE PEOPLE 

der which entitles those who furnish it to interest 
for its use? It must be clearly asserted at the 
outset that credit is not capital. It may enable 
the person who enjoys it to secure capital. It 
may even, to the extent that it serves equally well 
as a medium of exchange, take the place of capi- 
tal in the form of standard money. What the 
business man wants when he borrows from 
a bank is purchasing power. If the bank can sup- 
ply this in the form of a deposit credit, against 
which he may confidently check at will, or in the 
form of bank notes "as good as gold," he is well, 
even better pleased than if it supplied it in the 
form of gold itself. What he really wishes is 
the goods to be bought with the purchasing power 
loaned him. It is for these that he is willing to 
pay interest. It is even these that are really 
loaned to him, since the bank transfers to him a 
part of its own control over the collective wealth 
of the community. The purchasing power which 
figures in the transaction soon passes to some one 
else and continues to circulate, changing hands 
perhaps hundreds of times before the loan falls 
due and equivalent purchasing power must be re- 
turned to the bank by the borrower. A demand 
for bank loans is thus at bottom not a demand 
for money or for credit, but a demand for a part 
of the community's capital/' 



AND ABOLISHING CRIME 83 

The New International Encyclopedia, Vol. 2, 
page 624, has the following: "Ordinarily the bor- 
rower is content to receive the loan in the form 
of a credit account upon the books of the bank, 
upon which he may draw checks at will. Thus 
the discounted value of the mercantile paper or 
personal note is credited to the borrower as a de- 
posit. In most modern banks of deposit the vast 
mass of deposits are created in this way. In ef- 
fect the borrower has merely exchanged his credit 
for that of the bank. He is ready to pay current 
interest to the bank because the latter's credit is 
generally aceptable and serves all the purposes of 
real money. Business men, for example, day by 
day, deposit with their bankers the checks or 
sums of money which they receive in the course 
of their business, and, on the other hand, day by 
day, draw out such sums as they require for the 
payment of purchases of goods, wages, rents and 
other expenditure. 

"A bank therefore, while continually receiving 
deposits, is continually repaying deposits ; and the 
amount uncalled for is subect to daily fluctuation. 
At one period of the year, or in a certain condi- 
tion of trade, the amount of deposit may be high, 
at another low." 

In the "Money and Banking" volume of "Mod- 
ern Business" on page 212, is the following com- 



84 FINANCING THE PEOPLE 

ment on this credit money: 

"It is this deposit currency which has in the 
country removed a greater part of the burden of 
exchanging goods from the shoulders of money 
itself. Probably 75 per cent of our exchanges are 
performed by the use of checks and drafts drawn 
against these deposits. Money must be held by 
the banks against their deposits as a reserve to 
maintain confidence in their redemption, but the 
amount needed is only from 15 to 25 per cent of 
the outstanding credits. These checks and drafts, 
while they are merely promises to pay money and 
theoretically must be redeemed in money are so 
cancelled one against the other that little actual 
money is used." 

From what has been stated it is clear that the 
banks loan or sell credit. This credit amounts to 
just about half of the resources of the country. 
Nearly half of the business and industry of the 
country are based on credit. If an enterprise has 
no credit its operations and output are limited to 
the amount of cash available for providing sup- 
plies and meeting expenses. While if it has a 
large amount of cash and an equal amount of 
credit it can do double the business it could with- 
out the credit. So the credit is capital for all 
practical purposes, to the same extent as cash is 
capital. This places one-half of the wealth of the 



AND ABOLISHING CRIME 85 

nation in the form of credit. This is intangible 
wealth, but it is none the less real and effective. 

This credit is in the hands of the bankers and 
allied interest. The government has, under the 
banking laws, concentrated the credit of the whole 
people into the control of less than one per cent 
of the population. The government drives the 
credit into the control of this small per cent but 
it makes no effort to distribute it among the peo- 
ple from whom it is taken. 

This credit is the great working force of the 
nation and it is given into the control of the 
money monopoly without any reservations or re- 
strictions. They can sell this credit to whom- 
soever they please, and may withhold it entirely 
from public utilization if they so desire. They 
may sell it for a period and then declare a capi- 
talistic strike and withdraw it from productive 
enterprises as is now being done in a limited way 
by the head of the Federal Reserve Board. Bankers 
and other financiers will sell credit to a very small 
per cent of the population. Not to exceed ten per 
cent can get an adequate supply to meet ordinary 
business needs. This credit belongs to the whole 
people, and it is especially the joint product of the 
whole productive force of the nation. To labor- 
more than to any other force it owes its existence. 
If the farmers would select a small ten per cent 



86 FINANCING THE PEOPLE 

of the people to whom they would sell farm prod 
ucts the decision would be branded as an outrage, 
and yet that is what the banks and moneyed in- 
terest are doing with governmental sanction and 
encouragement. 

They are permitted to have the exclusive con- 
trol of the entire credit of the whole people and 
then distribute it to a very few regardless of the 
consequences to the material prosperity of the na- 
tion and the public generally. They have no more 
right to monopolize the credit and withhold it 
from 80 per cent of the people than the drygoods 
and grocery merchants have to refuse their goods 
to the bankers or any other class of citizens. If 
such a system of 'merchandising should be estab- 
lished there would be a protest presented by the 
excluded citizens; and they would have no more 
just grounds for complaint than do the citizens 
who are denied the privilege of buying any of 
the credit that has been permitted to pass into 
the control of the money monopoly. 

The Sun and New York Herald in an editorial 
in the issue of July 10, 1920, denounces the pres- 
ent financial policy as follows: "To the working 
bankers of every-day finance, each according to 
his lights, desires or necessities, is relegated the 
task of making practical decisions on what are, or 
not essential loans. A banker whose institution 






AND ABOLISHING CRIME 87 

may have investments in this, that or the other 
industry, service or security is placed in the posi- 
tion of choosing whether he shall be a sentimental 
hero, slaughtering his own, or a financial outlaw, 
protecting his own. The fact is nobody under 
such circumstances could justify or wisely define 
a non-essential loan. 

"The board thought high discount rates would 
cause the bankers to discriminate in making loans. 
What the high discount rates have actually done 
has been to build up a harmful system of favorit- 
ism by which the banker is compelled to protect 
his own customers or interests essential or non- 
essential. 

"The borrower who needs money for produc- 
tive purposes might as well shout up a tree as to 
try to borrow money unless he has a friend at 
court." 

We must not lose sight of the fact that the 
banks do not loan money, primarily. It is merely 
an incident, and gives them a cleavage into the 
credit of the entire nation. This credit, as pre- 
viously stated, is based upon the actual visable 
property of the whole people. It is concentrated 
into the hands of the financial monopoly and loan- 
ed to the ones who have a standing with the bank 
officials, and those who do not have this standing, 
even though they own the property upon which 



88 FINANCING THE PEOPLE 

this credit is based, cannot get an "accommoda- 
tion" at the bank. 

Professor Seager, further commenting on these 
credit loans, Principles of Economics, page 348, 
states : 

"As a matter of fact, modern banks take ad- 
vantage of the business community's preference 
for checks as a means of payment to lend deposit 
credits as well as money. The present-day bor- 
rower from a city bank desires, in nine cases out 
of ten, not money, but a deposit credit on the 
books of the bank against which he may draw 
checks at his convenience. Even if he wishes to 
pay at once to another the whole amount borrow- 
ed, he will usually prefer to draw a check for it 
rather than to pay it in money. From this it fol- 
lows that the deposit liabilities of the modern city 
bank represents quite as largely sums loaned by 
it to business men as sums entrusted to it by such 
men. A bank lends its credit quite as freely as 
it utilizes that credit in inducing others to lend 
to it." 



CHAPTER VIII 

CREDIT ATTRIBUTE 

What is this credit? and where does it come 
from? and upon what does it rest? To recapitu- 
late: 

The wealth of the United States may be di- 
vided into corporal and incorporal wealth, or prop- 
erty; or, into tangible and intangible. The ma- 
terial and visible property which has a visible ex- 
istence and, which has a market value placed upon 
it. is corporeal or tangible wealth, while the in- 
visible attribute of this tangible property is credit, 
or incorporeal wealth. 

Every dollar of corporeal wealth has its credit 
attribute. And the total tangible wealth of the 
whole country is the basis for the aggregate credit 
wealth. The tangible property is estimated to be 
worth about $200,000,000,000, and the credit 
wealth is placed at the same value. Then every 
dollar value of corporeal property carries an equal 
value of credit or intangible property. When an 
individual creates a certain amount of tangible 



90 FINANCING THE PEOPLE 

wealth he at the same time creates the same 
amount of credit, or intangible wealth. The 
tangible creation, he may be able to retain until 
he receives compensation for the efforts put forth 
to produce it. But the credit attribute, which is 
worth an equal amount, automatically passes into 
the control of the financiers without any compen- 
sation to the ones who produced it, and without 
any hope of even being permitted to share in its 
distribution, or receive any benefits from the fact 
of its existence. This credit wealth is absolutely 
under the control of the money monopoly and as 
fast as produced passes to them for them to sell 
and speculate on. 

An illustration sometimes helps to rivet a point 
in our mental receptacle and enables one, by com- 
parison to get a more definite understanding of 
the subject under investigation. It is an old prin- 
ciple of the law that when one owns a tract of 
land he also owns the air and light above it. They 
are inseparable and no one can legally deprive the 
owner of land of the right to the air and light 
which belongs with it. 

The owner of tangible property should be just 
as sacredly protected in the enjoyment of the 
credit attribute, as the owner of land is protected 
in the enjoyment of the attributes of air and light, 
which are really a part of his land; but no more 



AND ABOLISHING CRIME 91 

a part of the land than credit is a part of the 
tangible property. 

It may be contended that light and air are 
necessary to the proper enjoyment of the land, 
while property can be utilized without the attrib- 
ute of credit. Such contention is only theoretical, 
and not practical. It is true that to remove all 
air and light from a tract of land renders it prac- 
tically useless; it is equally true that to remove 
all credit attributes from tangible property places 
it practically in the same category as the land 
without air and light. It is killed except to a 
very limited extent. 

Credit is the electric force in modern business. 
It will consumate numerous transactions before 
material wealth gets in motion. The man without 
credit in the industrial and business fields makes 
about the same progress, as compared with the 
man who has ample credit, as the ox team makes 
when compared with the electric current. This 
may seem like an extravagant statement, but the 
fact will support the assertion. 

As stated, before, more than 95 per cent of the 
business is done on credit transactions. And real 
tangible money and wealth could do a very small 
part of the present business of this country. It 
is the credit attribute of wealth that carries on 
the business, trade and industry of all kinds up to 



92 FINANCING THE PEOPLE 

95 per cent of their aggregate volume. The indi- 
vidual or company who has no credit must confine 
operations within this 5 per cent limits ; in other 
words, he must operate outside of the 95 per cent 
limits where credit is functioning and limit his 
efforts within the 5 per cent limits where cash and 
"no- credit" is the motive power. 

Giving the credit to the money monopoly is as 
reprehensible as it would be to give it the monopo- 
ly on all air and light that are now considered an 
inseparable part of the land. If it had a monopoly 
on the air it would smother large numbers of the 
people because it would not bother with selling to 
those who could not buy in large quantities. That 
is the way it is killing individual enterprises to- 
day — refusing to sell credit to those who cannot 
afford to buy in large quantities. 

The remedy for these evils is to abolish the 
monopoly of credits and make every piece of prop- 
erty carry its credit attribute and make these tw T o 
properties — tangible and intangible — as insepara- 
ble as are the land and air. 

The credit should be restored to the material 
wealth to which it belongs. If every dollar of 
credit was placed upon its material base as it 
should be failures would cease and every base, 
whether large or small, would have to carry no 
more than its share of credit. This would safe- 






AND ABOLISHING CRIME 93 

guard business and avoid failures which invaria- 
bly result from the extension of too much credit 
for the base to support. The government author- 
izes the International Banking Corporation to is- 
sue ten times as much bonded indebtedness as it 
has capital paid in. When the material wealth is 
loaded down with three to ten times its own value 
it is likely to topple over and carry heavy losses 
to the investors. These are the conditions existing 
in many if not most business enterprises. They 
are top heavy with credit. It is piled up unrea- 
sonably high on a few and that colossal pyramid 
must be maintained by the financiers or the whole 
fabric of Big Industry will collapse and with it 
carry down the big investments of the financiers. 
And in order to supply this enormous credit to a 
few it is withheld from others and large parts of 
the material wealth are not permitted to carry 
their share of the credit to their own injury and 
ultimately to the detriment of the big concerns 
who now exult over the fact that they are get- 
ting the credit to which others are entitled. They 
are rapidly reaching a condition which will force 
a rebound to the destruction of many, if not most 
of these so-called big concerns. They have a mush- 
room existence, largely artificial, without suffi- 
cient material wealth for a sound basis upon which 
to stand. They must sooner or later pay the pen- 



94 FINANCING THE PEOPLE 

alty for thus overloading their tangible property 
with a credit which does not belong to it, and 
which it cannot carry. The credit wealth which 
naturally belongs to property is extremely benefi- 
cial and the property is almost worthless without 
this attribute ; but to pile upon any given amount 
of property more than a reasonable amount of 
credit will destroy the property upon which this 
excessive credit is placed. 

OTHER PEOPLES' MONEY 

If an individual creates $2,000 of material 
wealth per year, he at the same time creates $2,- 
000 of credit wealth. The material wealth he may 
keep but the credit wealth, under the present 
financial system, goes at once into the control of 
the financial monopoly. Every time the individual 
creates one dollar for himself he creates one for 
the financiers, and for which he gets absolutely 
no compensation. In the other words half of the 
earnings of every individual and enterprise is au- 
tomatically taken over by the money monopoly 
without any compensation being extended to the 
producers. 

Many people who have credit do not care to 
use it all of the time, and some do not care to use 
credit at all. This makes it advisable to have a 
receptacle where all credit may be placed and 
where those who are in need of its assistance, may 



AND ABOLISHING CRIME 95 

go and get the amount desired. 

But every person or firm should be permitted 
to take out his credit and use it when wanted ana 
needed. It matters not how small amount of 
credit he may have that small amount is just as 
valuable to the small property owner as the larger 
amount is to the millionaire; and he should have 
it when demanded. If the owner of this credit 
wealth does not desire to use it he should have 
the benefits of the interest which is paid for its 
use. If the credit is placed in the control of the 
government and loaned the owners will be com- 
pensated and get the benefits of interest received 
for that part of his wealth which is tied up in the 
national credits. If an individual has $100,000 
of material wealth and, therefore, $100,000 of 
credit wealth, the government would loan this 
credit for $6,000 per year. The owner ivould get 
the benefit of this $6,000 by having his part of the 
government expenses paid and thus relieve him of 
the burden of paying taxes which he would other- 
wise have to pay. Or, this interest money could 
be distributed among the people according to the 
value of their wealth. If the government should 
receive $9,000,000,000 as interest on a $200,000,- 
000,000 valuation this would give $45 to every 
person owning $1,000 worth of material property. 
By capitalizing labor and including it in the dis- 



96 FINANCING THE PEOPLE 

tribution would give a wider base upon which to 
spread the interest and would reduce the per cent 
correspondingly. 

But every person should have the option of 
using his credit, and if he does not desire to use 
it himself it should be loaned by the government 
that he may get the benefits which results from 
the use of this feature of his property. No credit 
should be permitted to go to waste when there 
are persons and firms who are needing it in their 
business ; on the other hand the person who owns 
the material wealth upon which this credit wealth 
is based deserves the income which its use brings. 
It is no approach to justice to summarily take 
this credit wealth from the real owners and pass 
it to the financiers to be used regardless of the 
interest of the real owner, and without compen- 
sating him for its use. 

The national credit should be distributed 
among the people according to the amount of 
credit-yielding property owned by each. If an in- 
dividual owns $1,000 worth of property he should 
have the same per cent of credit extended on his 
property that the corporation with $100,000,000 
capital receives. The individual's property should 
be permitted the use of its own attribute, and 
this use should be extended without any equivoca- 
tion or parsimony. The individual with a prop- 






AND ABOLISHING CRIME 97 

erty valuation of only $100 should receive an ex- 
tension of credit under as favorable terms as 
would be extended to the wealthiest corporation. 

The government would place a valuation on 
every one's property and would compel a loan to 
be made on demand of the owner equal to a cer- 
tain per cent of the valuation thus fixed by the 
government. This would throw back among the 
people the credit which attaches to their property. 
Such distribution of credit would largely increase 
production by giving the producers a working cap- 
ital to operate the various enterprises. 

Every one will concede the benefits which 
would result from an equitable distribution of the 
national credits among all classes, thereby ena- 
bling the producers to finance much larger enter- 
prises, and to that extent increase the production 
of the necessities and comforts of life, and thus 
quiet the clamor for increased production of need- 
ed commodities. The financiers will meet the con- 
cession of the benefits which would flow from the 
adoption of the proposed distribution of the cred- 
its among all classes according to property owned, 
by charging impracticability against the system. 
If impracticable there is no use to waste time with 
the plan. If impracticable, wherein does its im- 
practicability lie? Is it in the requirement that 
the government must assess the property of every 



98 FINANCING THE PEOPLE 

person and keep a record of that value as a basis 
for making the loan, or extending the credit? 
This could not be the impracticable point, for this 
very same record is made almost yearly by every 
state for the purpose of taxing the property of 
the individuals. With a very little elaboration 
this same record could be used as the basis for 
extending credit. If an individual's property is 
valuable for taxation it should PER SE be valua- 
ble for the extension of credit. So the establish- 
ment of a record upon which to extend the credit 
is entirely practicable. And the financier's objec- 
tion is not fatal at this point. 

It may be suggested that it would be imprac- 
ticable to extend credit to so manv small borrow- 
ers. This does not strike at the practicability of 
the system. It is just as easy to extend a credit 
of $100 to an individual as to extend a credit of 
$1,000,000 to a corporation. It simply requires 
more detail work, but not by any means to the 
point of making it impracticable. As a matter of 
fact banks frequently make loans for less than 
$100, even under present regulations, and they are 
profitable loans and not burdened by details. When 
the proposed plan becomes properly systematized 
the details would be largely eliminated and the 
record of government assessments would be the 
p;uide in making all loans. This would expedite 






AND ABOLISHING CRIME 99 

the transaction of the business since the borrower 
would know just what amount he could demand, 
and the bank would know just what amount must 
be loaned. All haggling and parleying would be 
dispensed with and there would be nothing to do 
but follow the law. 

The next objection raised against the practica- 
bility of the system is the losses that would re- 
sult from such indiscriminate extension of credit 
to people who have no financial rating. The an- 
swer to this is that they have a financial rating 
established by the government when it places a 
credit value upon the property of every individual. 
This refusal to pay debts is a capitalistic scare- 
crow which results almost entirely from the pres- 
ent method of transacting business. If a borrow- 
er gets in a failing condition, the banks instead 
of assisting him to hold up in business, presses 
him to the wall and forces payment at a time, 
probably when full payment is impossible. The 
debtor is then condemned for the failure which 
the bank forced him into. Every one of sound 
mind desires to pay his debts, and almost every 
one will pay them if given a chance. The banks 
will say what a person should do instead of con- 
sidering what he can do. If the individual can do 
a thing, then it becomes proper to say if he should 
do it. 



100 FINANCING THE PEOPLE 

Spiegle, May, Stern and Company are one of 
the largest instalment houses in the world. They 
claim to have something like one-sixth of the fam- 
ilies of the United States on their account books 
as customers. They sell on credit only; and sell 
to strangers whom they never saw, nor heard of 
before. These strangers and customers live in ev- 
ery part of the country, and their orders are filled 
and the customers given credit on the books of 
that institution without any recommendation from 
any one as to their reliability. And the officers 
of this institution say their losses under these 
conditions are negligible. If a customer cannot 
pay when the money becomes due the company 
waits on him until he can pay and the accommo- 
dation is appreciated and the money paid as soon 
as convenient. Here is an institution extending 
credit to a very large per cent of the American 
people, and to strangers living thousands of miles 
away, and no collectors to spur them to pay, and 
yet this system is working satisfactorially and 
the losses are negligible. Are the financiers will- 
ing to admit that these institutions have a better 
financing system than that provided by the United 
States ? At least they must admit that it is prac- 
ticable to establish a system under which it would 
be safe to extend credit to every individual ac- 
cording to the property owned. 






AND ABOLISHING CRIME 101 

This is not the only concern doing this credit 
business. There are many such concerns doing a 
similar business with strangers and trusting them 
for payments. Many publishing companies will 
send books to any one sending for them and will 
permit a thirty days' inspection and examination 
before making any payment. If the receiver of 
the books decides to keep them he may do so by 
paying a small amount down and the balance in 
small monthly payments. If the business con- 
cerns may extend credit to people of small means 
with such assurance of payment the financiers 
could extend the equal favors if they were so in- 
clined. 

But they come back with the argument that 
these concerns who thus extend credit to people 
so promiscuously retain a lien on the property sold 
as security. The answer to that is that the gov- 
ernment in extending loans to individuals would 
have a lien on all property belonging to the bor- 
rowers. Any property belonging to the borrower 
could not be sold and the purchase money received 
without the proceeds going through the hands of 
the government and could there be intercepted and 
applied to the payment of the loan. This is not 
only true of the property owned, but applies to all 
future receipts of the debtor whether for other 
property or as wages. His whole life receipts for 



102 FINANCING THE PEOPLE 

property and labor will continue to come into the 
hands of the government and can be applied on 
the indebtedness. This is true also of labor and 
enables labor to borrow liberally with perfect safe- 
ty to the government. It gives labor a rating and 
standing which places it upon a financial basis. 
Death is about the only thing that could jeopar- 
dize the loan to labor and that could be very eas- 
ily overcome by requiring the borrower to have 
his life insured during the period of the loan. This 
places labor and capital on equal footings in com- 
mercial rating. Such a financial system would be 
practical, adequate and efficient, and above all im 
partial. 

It would be as safe for the government or 
banks to extend credit to people of small means as 
it is for individuals to extend such credit. In ev- 
ery city are found individuals who make it a busi- 
ness to loan money to the propertyless class of 
citizens. These are the ones the banks list as un 
safe loans and refuse to make them for that rea 
son. The individuals who extend these loans to 
tins class have little or no trouble collecting their 
money. They loan small sums ranging from $5 
up to several hundred and charge from 60 per 
cent to 500 per cent per year interest. In Chi- 
cago, it is stated by government officials that 
there is $17,000,000 loaned to this propertyless 



AND ABOLISHING CRIME 103 

class at 120 per cent interest. How much is loan 
ed at less than that rate and above the legal rates 
is not stated. 

Advertisements like the following are common . 

"LOANS, $25 AND UP 
"By meeting the demands of the people for loan 
accommodations at a very low lawful rate, our 
elastic plan for repayment — the high quality ot 
our service — has won the respect and the favora 
ble consideration of the public. 

"SEE OUR RATES 
"$25.00 loan, $1.25 per month 
"$50.00 loan, $2.50 per month. 
"$75.00 loan, $3.75 per month. 
"$100.00 loan, $5.00 per month. 
"No matter for what purpose you may need 
money you can afford to borrow from us at a prol- 
it to yourself. 

GUARANTEE LOAN COMPANY, 

"Atlanta National Bank Building, Atlanta." 

This custom prevails in all cities and this prop- 

ertyless class are the victims of the high interest 

companies. If these borrowers can contract this 

high rates of interest and meet their payments 

the loans would be safer and payment could bu 

made easier and more readily when a reasonable 

rate of interest is charged. So loaning money or 

lit to the persons of small means is not only 



104 FINANCING THE PEOPLE 

practicable, but it is being done on a large scale 
and at rates of interest that are appalling when 
taking into consideration the financial condition of 
the ones from whom this interest is collected. 

There are times when every one must have 
money. And there are times when there are only 
two ways open to the individual to get this money * 
one way is to borrow it, the other is to steal it. 
In the absence of the government providing a sys- 
tem under which the money may be borrowed, the 
next and the last resort is to steal it. Under the 
Union Finance System, the questions of losses and 
impracticability of extending loans to so many 
customers are entirely eliminated. The present 
system of financing is cumbered with details to 
the extent of approaching the impracticable and 
at the same time destroying the utility of the 
loan. The system of making short time loans for 
thirty to ninety days prevents the borrower from 
making any permanent plans that extend beyond 
the life of the loan. He can only plan for tem- 
porary purposes, and such plans are usually dis- 
advantageous and are frequently disastrous. 

The system is tedious and expensive in that it 
requires a large clerical force to make the records 
of the frequent loans and payments. Under a sys- 
tem that would make the loans for one or more 
years at the time, the details of business would be 



AND ABOLISHING CRIME 105 

removed and it would be as easy to accommodate 
12,000 yearly customers, or 24,000 biennial ones, 
as it is to accommodate 1,000 under the thirty- 
day system. 

The question of safety is settled by the gov- 
ernment requiring all payments to be made by 
check. If the government loans a person money 
he cannot sell his property and place it beyond the 
reach of the bank. The money received must 
first be deposited in the bank before any other 
disposition can be made of it, and if the bank de- 
sires to do so it can charge his deposit off against 
his indebtedness. But this protection would not 
be necessary for his future receipts would con- 
tinue to come into the same bank to which his in- 
debtedness is due. If he should remove to some 
ether locality his bank account and indebtedness 
would go together, so that it w r ould be impossible 
for him to take one without the other, and he 
could not do business without taking both. 

The financiers may here challenge the practi- 
cability of making all payments by check and dis- 
pensing with the use of metallic money as a me- 
dium of exchange and retaining it for only re- 
demption purposes. Here again is where the im- 
practical has displaced the practical. The easy 
and practical system is the universal check sys- 
tem. This is acknowledged by all economic wri~ 



106 FINANCING THE PEOPLE 

ters. It is the system that the public prefers and 
is using more generally all the time. 

Principles of Economics, pages 343-4, discusses 
this question as follows: "One reason why a bank 
may count with confidence on retaining control 
over the major portion of its deposits from day 
to day, is because the check is such a convenient 
means of payment that it tends to become the 
principal medium of exchange in communities m 
which banking has been developed. If all of the 
inhabitants of a town had deposits in the same 
bank, it will be readily perceived that payments 
umong them might be made exclusively by means 
of checks and that such payments need involve 
the actual withdrawal of no money from the bank. 
The butcher, the grocer, the drygoods merchant, 
the lawyer, the physician, etc., might exchange 
checks at the end of each week or month, and 
these transfers could be noted on the books of the 
bank. No money would be required, because un- 
der the assumed conditions checks would accom- 
plish all the exchange work to be done. Only 
when payments were made to persons who were 
not depositors in the bank would the bank's de- 
posits be encroached upon." Quoting further on 
page 345: "The use of checks, drafts and postof- 
fice, express and telegraph money orders as media 
of exchange confines the use of money in progres- 



AND ABOLISHING CRIME 107 

sive communities within very narrow limits. Well- 
to-do people in cities in the United States already 
use money only for small-change transactions and 
for traveling expenses. As the country becomes 
more densely inhabited and credit institutions are 
perfected, it hardly admits of question that this 
custom will become more general and that credit 
will serve as the medium for an ever larger pro- 
portion of exchange transactions. This does not 
mean that the monetary unit will lose its impor- 
tance as standard of value, since all credit instru- 
ments are expressed in terms of money. In fact, 
since credit is based on confidence, the wider the 
extension of credit, the more vitally important will 
the soundness and stability of the monetary sys 
tern become." 

A unified banking system is simple and its ad- 
vantages are recognized by all economic students, 
If there is only one bank in a city the business of 
the city is transacted largely by making payments: 
through this one bank; and the payments are 
made by the simple process of transferring the 
credit on the bank books from one person to an- 
other. If a business man receives a check he 
knows that it is on the bank where he does busi- 
ness and carries an account. He is not required to 
go to different banks and collect checks to get the 
money to deposit in the bank where he keeps his 



108 FINANCING THE PEOPLE 

account. As other banks are added to the local- 
ity the finances become complex and confused and 
simplicity is crowded out. There are no advan- 
tages that a multiplicity of banking institutions 
have over a single unified system; on the contrary 
the single system will surpass in economy, utility, 
expedition and safety. 









CHAPTER IX 

THE MONEY MONOPLY 

Ex-President Wilson's forcible statement made 
in 1911 may be very appropriately repeated here: 

"The great monopoly in this country is the 
money monopoly. So long as that exists our old 
variety and freedom and individual energy of de- 
velopment are out of the question. A great indus- 
try is controlled by its system of credit. Our sys- 
tem of credit is concentrated. The growth of the 
nation, therefore, and all our activities are in the 
control of a few men, who, even if their activities 
be honest and intended for the public interest, are 
necessarily concentrated upon the great undertak- 
ings in which their money is involved, and who, 
necessarily, by every reason of their own limita- 
tions, chill and check and destroy genuine eco- 
nomic freedom. This is the greatest question of 
all, and to this statesmen must address them- 
selves with an earnest determination to serve the 
long future and the true liberties of man." 

The National Republican Platform, 1920, con- 



110 FINANCING THE PEOPLE 

tains the following: "We pledge ourselves to earn- 
est and consistent attack upon the high cost of 
living by rigorous avoidance of further inflation 
in our government borrowing, by courageous and 
intelligent deflation of over expanded currency and 
credit. 

"The crux of the present agricultural condi- 
tion lies in prices, labor and credit. 

"The federal farm loan act should be so admin- 
istered as to facilitate the acquisition of farm land 
by those desiring to become owners and proprie- 
tors and thus minimize the evils of farm tenan- 
try and to furnish such long time credits as farm- 
ers may need to finance adequately their long-time 
production operations. ,, 

"The prime causes of the high cost of living 
has been first and foremost, a 50 per cent depre- 
ciation in the purchasing power of the dollar, due 
to a gross expansion of our currency and credit. 

"As a matter of public policy, we urge all banks 
to give credit preference to essential industries." 
The Democratic Platform contains the follow- 
ing: 

"Later was established a system of farm loan 
banks from which the borrowing already exceeds 
$300,000,000. We pledge prompt, consistent sup- 
port of sound and economic measures to sustain, 
amplify and perfect the rural credit statutes thus 



AND ABOLISHING CRIME 11] 

to check and reduce the growth and course of 
farm tenancy." 

"NEW YORK INTEREST RATES HIGHEST IN 
THE WORLD"— WILLIAMS 

The Comptroller of the Currency, John Skel 
ton Williams, in a formal statement issued on Oc 
tober 16, 1920, says: 

"The raising or lowering of the renewal rate- 
on the exchange is frequently accompanied by up 
ward or downward movements in stocks and se 
curities, and those responsible for the fixing of thf 
rate therefore have the opportunity, whether ex 
ercised or not, of profiting largely by operation? 
on the stock market, which is so often and direct 
ly affected by the call money situation. I do not 
of course, undertake to say that this 'informa; 
money committee' does take improper advantage 
of its foreknowledge, but there are critics whe 
severally censure the existing arrangements." 

"SEES DANGERS IN SITUATION 
"Certainly all prudent and sensible men wil 1 
agree that there is danger in the concentration of 
such opportunity and power in the hands of a fev 
men. Temptation to use this power for individ 
ual profit must arise, and human nature is not 
changed by high position in the financial world 



112 FINANCING THE PEOPLE 

"Power to fix money rates for all, or nearly 
all, of the banks in New York City, and to change 
them daily, is a grip on the heart of our commerce. 
It permits such inferences as fallible human judg- 
ment, whim or interest, may direct with the nat- 
ural and orderly movements of money, the life 
blood of business. The matter of arbitrarily fix- 
ing money rates at the money center, possibly re- 
versing the natural and healthy flow and affecting, 
directly or indirectly, billions of dollars of securi- 
ties values and other property, is left to a small 
and varying number of private citizens without 
official responsibility, deciding in a moment and 
in secret. 

"ENTIRE NATION AFFECTED 

"The evils and dangers of such methods could 
be recited indefinitely. They reach to the remo- 
test corners of the Union and its possessions and 
touch harmfully all class of people. The direct 
tendency is to reverse one of the foundamental 
purposes of the Federal Reserve Act, which is to 
promote orderly distribution of money through 
the country to meet the needs of commerce and 
agriculture. Excessive interest rates offered in 
New York artificially draw money away from out- 
side communities through their banks, and often 
leave legitimate enterprises starved or pinched, 



AND ABOLISHING CRIME 113 

while feeding speculative movements which may 
be adding nothing to real industrial or commercial 
wealth. 

"I reiterate the statement previously made 
that the excessive rates on call money, artificially 
fixed and tolerated in New York, in my opinion, 
have been a potent influence in depressing seri- 
ously the prices of all investment bonds and stand- 
ard shares, the shrinkage in which in the last 
twelve months has amounted, including the depre- 
ciation in Liberty Bonds, to several billion dollars. 

-DISCRIMINATION IN LOANS CHARGED 
"When the renewal rate for a certain day with- 
in the last twelve months was posted on the stock 
exchange at 16 per cent the report of one partic- 
ular New York bank showed that on that date this 
bank was charging on loans for itself and its cor- 
respondents 7 per cent on $4,900,000 ; 8, 9, 14 and 
15 per cent on $1,428,000 ; 18 per cent on $750,000 ; 
20 per cent on $41,100,000; 25 per cent on $3,- 
500,000, and 30 per cent on $900,000. 

"The effect of these rates is seen when the 
general managers or executives of railroads or 
other large corporations visit New York to raise 
money necessary for the redemption of retiring 
loans or for the extension and promotion of new 
business. The banks and bond houses solemnly 



114 



FINANCING THE PEOPLE 



point to the high rates paid for call money, and 
corporations whose credit abundantly justified a 
5 or 6 per cent interest basis, have been forced to 
pay 7 or 8 or 10 per cent on loans for one year, 
two years, three years or five to ten years, and 
are sometimes pursuaded by the bankers through 
whom they obtain the funds that they are doing 
well to get money even on such terms, because 
money on call has been advanced, often artificially, 
to 12 or 15 or 20 per cent for a few days at a 
time. 

'The same cause that cripples and hampers a 
great railroad system, or a municipal government, 
also deprives or injuries or ruins a country store- 
keeper, a small farmer or the owner of a large or 
a little manufacturing enterprise. 

"The high rates for call money in New York 
have thus shut off a large part of the investment 
demand for securities, which, during the last 
twelve months, largely because of these disturb- 
ing conditions, have been forced down to the low- 
est prices in forty years. 



"HOLDS POLICY IS UNNECESSARY 

"It is my belief that if the call money rates 

had been maintained in New York at 6 per cent, 

or at the maximum rates which are charged in 

other money centers, as I believe could have been 



AND ABOLISHING CRIME 115 

done with a reasonable degree of co-operation 
upon the part of the New York banks, the unpre- 
cedented shrinkage in security prices in the last 
twelve months would not have taken place and the 
apparent loss of billions of dollars in values would 
have been avoided. 

* 'Sworn reports to this office showed more 
than 4,000 loans had been made by the New York 
banks between October 1, 1919, and August 1, 
1920, at rates of 15, 20, 25 and 30 per cent. In 
three of the largest bank loans made at those 
rates and between those dates, aggregated more 
than $600,000,000. The figures represented only 
the loans made by the banks for their own ac- 
count and not for their correspondent banks. The 
record also shows that the total loans outstanding 
upon which interest at 15 to 30 per cent was be- 
ing charged by a portion of these banks on forty- 
two diiferent days for which reports were received 
from them, aggregated more than $1,000,000,000 

"The record also shows that the amount oi 
loans made during the same period, at rates in ex- 
cess of 10 per cent and up to but not including 15 
per cent, amounted to more than $1,400,000,000 
there being more than 11,000 of such loans. 

"In addition to the above, the aggregate oi 
loans upon which a portion of the banks reported 
that they were charging, on eighty-one different 



116 FINANCING THE PEOPLE 

days, interest in excess of 10 per cent and up to 
but not including 15 per cent, was about $900>- 
000,000. The brokers, street loans, upon which 
the New York banks, during the period referred 
to, were charging more than 8 per cent per annum 
and up to 10 per cent, reached in the aggregate, 
some billions of dollars additional in amount and 
tens of thousands in numbers. 

"It is no part of the functions of a public of- 
ficial to moralize on speculative operations. My 
attention is demanded when such operations pro- 
duce conditions retarding the development of the 
country and endangering the stability of its bust 
ness. Corporations, individuals and investors gen- 
erally are drawn away from legitimate invest- 
ments enterprises by the prospect of 10 to 20 per 
cent interest." 

The foregoing quotations are serious charges 
to make against the present financial system. A 
financial system that deflates and inflates at the 
dictation of a few money magnates, and halves 
and doubles prices at the whim of the manipula- 
tors, and that refuses to function except in behalf 
of a favored few, is an extremely unfavorable pol- 
icy to have the business, industry, happiness and 
even lives of the people dependent upon to guide 
and direct them. 

Why so much solicitude for the farmers ? Will 



AND ABOLISHING CRIME 117 

the present financial system not assist them? il 
not what is it for? and why not compel favorable 
action or abolish the system and enact a system 
that is not too good to finance ordinary farmers? 

Here is an admission by the President of the 
United States, and the two great political parties, 
that the present system of finance is inadequate 
to meet the needs of the country. It is frankly 
admitted that the farmers can expect no relief 
from the present so-called financial system. There 
are 35,000,000 of the farming population; and the 
financial system does not extend to them; noi 
over them. So what is proposed as a remedy to 
help the farmers in their efforts to survive ? The 
proposal is to extend the farm loan act. What is 
that act? That act is a farce in so far as it af- 
fects real farmers. It is an insult to the farmers 
to call it a farm loan act. It ought to be repealed 
or its name changed, for it is not a farm loan act 
except in name. 

It had been in operation nearly three years, 
when the Democratic Platform informed the coun- 
try that loans to the amount of $300,000,000 had 
been made under the provisions of the act, and 
points to that fact as a great accomplishment 
Here is one-third of the population clamoring foi 
assistance to finance their operations, and they 
have an estimated wealth of $80,000,000,000 and in 



118 FINANCING THE PEOPLE 

three years' time they are enabled to get a boast 
ed $300,000,000 loan. One corporation in the 
United States could have gotten a loan in excess 
of that amount within a few days and the achieve- 
ment would not have attracted passing notice 
And even the $300,000,000 which was received 
was largely killed before it reached the ones foi 
whom it was intended. The applicant for a loar 
must make out a statement showing the amount 
wanted and the purpose for which the money is tc 
be used when received, and it can be used for nc 
other purpose. 

Suppose a farmer wants to get a loan of $2, 
000, his application would read something like 
this : 
For What Wanted Amount Wanted 

To buy team $500.00 

To buy seed and fertilizer for spring crop.. 500.00 
To repair house and build fence around the 

farm land 500.00 

To buy tools and farm machinery 500.00 

Total amount wanted $2,000.00 

When wanted — within 30 days. 

This application is presented, probably, in Jan 

uary so as to be prepared to plant a spring crop 

The applicant does not know that he will get the 

loan, but he rather expects it, since his bankei 



AND ABOLISHING CRIME 119 

encourages him in that belief. He waits patiently 
for the money, so he can begin his farming opev 
ations. But it does not come; and soon the crop 
season passes, and no money has been received 
and he has lost out and goes to the city to find 
work to support his family. The greater part oi 
these applicants never hear from their applica 
tions with any allowance at all, and the very smali 
per cent, who do get a loan, get it so long aftei 
the filing of the application that the money cai: 
not be utilized advantageously. If a merchanl 
should go to the bank to borrow money to buy a 
new stock of goods and have to wait from a few 
months to eternity for the loan to materialize he 
would not call that an adequate financial system. 
Instead of making the present system applicable 
to farming it is proposed to establish a little finan- 
cial system specially for the farmers, and set them 
down at a table with nothing on it, and no one to 
serve them, and then advise them to wait patient- 
ly until they are served. It is a "snipe" hunt with 
the farmers given the privilege of holding the 
sack. 

There are, then 35,000,000 of the inhabitants 
whom the present financial system does not pre- 
tend to assist. Then, there are 35,000,000, or 
more, of the laboring population who are also ex- 
cluded from the operations of the system. This 






120 FINANCING THE PEOPLE 

leaves only about 35,000,000 who may participate 
in its benefits; and of this number the nation's 
credit is concentrated on a very few, leaving a 
very small per cent to be extended to the major 
portion of this small division. Class legislation 
should not be encouraged. All laws should be 
made general when at all possible. And instead 
of having a number of little money systems for 
different industries one system should be made 
to apply uniformly to all and finance every busi- 
ness and every person on equal terms. They 
should not be treated as menials, and not al- 
lowed to be served at the same table with the 
financiers. 

The farmers should not have a special farm 
loan act applicable to them alone. The American 
people should have a financial system that is no 
respecter of persons, nor callings. This would 
meet the needs of all, and that includes farmers. 

By extending the financial system over the 
farmers and giving to their property the credit 
attribute to which it is entitled, would automati- 
cally increase the farm wealth to the extent of 
the credit restored. If the government should de- 
cide to extend 100 per cent credit on all property 
that would mean an increase in farm wealth of 
$80,000,000,000, or 100 per cent; if on the other 
hand only a 50 per cent credit should be extended 



AND ABOLISHING CRIME 121 

it would increase farm wealth half, or $40,000,000- 
000. This increase would come through the res- 
toration to the tangible property of the country 
of the credit attribute which has been stripped 
from all farm property by the money monopoly. 
Farm property has thus been denuded of its most 
vitalizing and productive qualities, and by restor- 
ing these essentials to farm property will give 
farming a new life and a new meaning. If the 
farmers could command a credit of $40,000,000,- 
000 to $80,000,000,000 it would be worth to the 
nation, as a productive force, more than the value 
now placed upon all farm property. Farm produc- 
tion could be doubled very easily. At present 
farm property is very largely dormant because it 
has not its credit attribute to develop and move it. 



CHAPTER X 

SOME FEATURES OF THE SYSTEM 
NON-INFLATABLE CURRENCY 

The proposed system of finance cannot be in- 
flated. There is no increase nor decrease in the 
circulating currency possible. For in the strict- 
sense there is no circulating currency. Every dol- 
lar of money that is in active service is carrying 
a load of business and it cannot be withdrawn 
from that one purpose for speculative purposes. 
There is not an idle dollar in the United States 
and therefore there can be no such thing as an 
Undue accumulation of the supply of currency. The 
only money that is transacting business under the 
Union system is the credit money-checks. No 
check can be used for two or more purposes, and 
therefore when it performs the purpose for which 
ii; is issued it dies, and cannot be held for transfer 
to some other person, nor to influence the money 
supply. 

If the demands of trade and industry require 
the issuance of checks aggregating $1,000,000,000 
daily, that amount of checks or money will be is- 



AND ABOLISHING CRIME 123 

sued. These checks cannot be used for the pur- 
pose of paying any of tomorrow's business or con- 
tracts. This compels the payees of the checks to 
cash them at the bank in order to get them cred- 
ited in their deposit account. This is the only 
purpose for which checks can be used; so every 
incentive is to present them for payment. This 
would compel cashing in the entire money supply 
daily; and every day would witness the entire 
money supply of the nation cleaned up and ready 
for a new supply the next morning. 

There is just enough money put out every day 
to transact the day's business and at the end of 
the day that money is taken up and in this way 
the currency supply is adjusted as systematically 
as the clock works, and it is done automatically. 
There can be no deflation, no inflation, no specu- 
lation, no congestion. 

Under the present system if there is sufficient 
money to transact only $1,000,000,000 of business 
daily and a business amounting to $5,000,000,000 
is developed, the system cannot handle it ; and the 
result is the speculators run the price of call 
money up to 25, 50, or even to 100 per cent, and 
discount rates are largely increased and money 
made more expensive to the individuals who try 
to keep the county's business moving. Business can 
not operate without the necessary money to move 



124 FINANCING THE PEOPLE 

it, and this forces that part of the nation's enter- 
prises which cannot get the proper financing to 
shut down. So under this system the industry of 
the country must adjust itself to the money sup- 
ply ; and every business concern must have a finan- 
cial institution to assist it through these times of 
stress. Financial institutions are limited in the 
amount of credit they can loan. They generally 
have demands far in excess of their supply, and, 
of course, industry and business are restricted to 
the amount of credit available for their develop- 
ment, and they are also restricted to only such 
persons and concerns as can get an adequate ex- 
tension of that credit. This circumscribes busi- 
ness and industry, as well as individual and cor- 
porate enterprises, within an impenetrable wall 
Only business and industry to the amount of the 
available finances can possibly survive; and then 
again only the individuals and corporations who 
are within this impenetrable financial wall and 
can, therefore, participate in these available fi- 
nances, can compete with these favored few. The 
condition stated, enables the financiers to select 
customers to whom they will extend a credit and 
thereby enable them to successfully operate a bus- 
iness. The ones they select are placed within the 
favored circumscribed wall and their success is 
practically assured; the ones who are denied this 






AND ABOLISHING CRIME 123 

credit are placed outside of the circumscribed 
limits and are as equally assured of failure. In- 
dividuals and corporations now entering business 
must go to Big Finance and get his placement 
either with the select or with the condemned. 

Banks are becoming more and more restrictive 
in making loans. Large capitalists are able to 
utilize all credit the banks can extend; and since 
the capitalists are the best paying customers oi 
the bank it is industrially natural for the bank 
to reciprocate and loan the bank's credit to the 
large concerns. Another impelling reason for the 
bank's extension of practically all credit to the 
large enterprises is the ease with which it may be 
looked after and attended to. Is it much more 
convenient to loan all credit to a few capitalists 
than to distribute it in small amounts to severa] 
thousand customers. This is cruel, and deals out 
financial death to thousands and probably millions, 
but it is natural and accords with human nature 
and also with the laws of the country. Few men 
refrain from doing what the laws permit, and es- 
pecially when it is a permit that carries pecuniary 
profits. When the laws permitted piracy men of 
wealth and social standing would not hesitate tc 
head a pirate crew ; when slavery was fashionable 
all were anxious to own a slave; and when intox 
i eating liquors were permitted to be made and 



126 



FINANCING THE PEOPLE 



sold there were plenty of people ready to engage 
in that business. So with the banking business, 
as long as the government permits the bankers tc 
monopolize the credit and withhold it from the 
people and thus kill off all business from which it 
is so withheld, there will be found plenty who are 
willing to slaughter the little enterprises of the 
country, if, in the process, they are enabled to ac- 
cumulate large sums of wealth. 

It is not, therefore, appropriate to condemn 
the individuals for doing things which the laws 
permit and even encourage. 

Another condition which frequently arises un 
der the present system is a decrease in the volume 
of business so it does not utilize the money supply 
This produces a large surplus currency and the 
money supply becomes plentiful and inflated. 

These conditions could not arise under the pro- 
posed Union Finance. If a $10,000,000,000 busi- 
ness develops one day it would be readily handled 
even though there was not one dollar in existence 
at the beginning of the business day ; and then if 
the following day should be a business blank there 
would not be an idle, or surplus dollar in the coun 
try. All money issued the previous day would be 
withdrawn from circulation. This is a complete 
reversal of the present system, in that under it 
the business regulates the money supply and calls 



AND ABOLISHING CRIME 127 

into circulation just the amount necessary to han 
die the business as it develops, while under the 
present system the money supply regulates busi 
ness and holds it down to the capacity of the cir 
culation of the currency and credit which the 
banks release. 

CHECKING ACCOUNTS 

"The National Association of Credit Men is 
urging the more general use of banks in an effort 
to increase circulation. 

"The banking and currency executive commit 
tee of that organization recently expressed the 
opinion that every effort should be made to have 
checks become more completely the nation's real 
currency; the circulation of currency for the pay 
ment of accounts, when checks would be safer and 
more adaptable, is unwise and unsafe. 

"The accounts of individuals should be paid by 
check and the use of currency restricted. 

"By getting hoardings out of secret places and 
into the banks, by everyone carrying little cur- 
rency in his pocket and using a check book in- 
stead, we can quickly cure one of our present prob 
lems and probably reduce the crime wave that has 
currency for its chief attack. 

"THE BARNETT NATIONAL BANK 
A Florida Landmark" 



CHAPTER XI 

AN ELASTIC CURRENCY 

An elastic currency is one that expands or 
contracts as business increases or diminishes. It 
adjusts itself to business requirements. This is 
where the Union Financial System paramounts 
any other. It is one grand bank spread over the 
whole nation. A deposit in one is a deposit in all, 
and a check on one is a check on all. It is all 
banks consolidated into one federal reserve bank 
or pool, with the United States back of it. There 
is no such thing as taking money out of one and 
placing it in another. It is all one bank and when 
a person checks out a sum of money or credit it is 
replaced by the person in whose favor the check 
is drawn. 

A gives B a check for $1,000,000. There is 
only one bank in the United States and this check 
must be presented to some member of it. Where- 
ever presented, all that is done is to give B credit 
on the books for $1,000,000 and reduce A's credit 
by that amount. A dips out $1,000,000, and hands 



AND ABOLISHING CRIME 129 

it to B who returns it to the same pool and con- 
sequently the amount in the pool is not lessened 
or lowered. A million people may be checking on 
this Union Bank daily, and the funds in the bank 
will not be lowered. The million people to whom 
the checks are given will have to present the 
checks to the same bank for deposit. This is just 
transferring the credit on the bank books from 
one person to another without the loss of any de- 
posits by the bank. 

MONEY SUPPLY INEXHAUSTIBLE 
It is obvious that the proposed Union plan 
gives a perfectly inexhaustible money supply If 
business should increase until the daily turnover 
should reach one hundred billion dollars, and 
checks to that amount were drawn on the Union 
bank, it would not affect the bank in the least 
The bank would not feel the least concern over its 
own safety, and would stand the rush like a wall 
of adamant. It would have nothing to gain and 
nothing to lose by the amount of checks drawn 
and paid. 

If one hundred billion dollars worth of checks 
were drawn, the drawers would have that amount 
placed to their credit as deposits, and the bank 
has lost nothing. It is as though that amount 
were dipped out by some and poured in by others, 



130 FINANCING THE PEOPLE 

and the money pool is as full after a most strenu- 
ous day of business as it was at the opening in 
the morning. 

No one can corner the money nor hoard it. 
Every dollar is in the control of the government 
and is, at all times, available for use. There will 
be no such thing as depleting the money supply 
in any section of the country nor congesting it in 
another. It is uniform over every section. A bil- 
lion dollar check could be cashed just as well in 
the most remote crossroads village as it could be 
in Chicago or New York. The drawee would be 
given a certificate showing he had deposited the 
amount of the check. He could give checks 
against this deposit or credit just as is now done. 
In fact, as far as the minutia of transacting busi- 
ness is concerned, the public would hardly notice 
the change. 

BUSINESS CANNOT OUTGROW THE UNION 
The Union Finance cannot be outgrown. It is 
no make shift nor patchwork. It is a permanent 
policy that will meet all emergencies. If business 
should increase to $100,000,000,000 daily it would 
handle it without the least strain. If then, the 
business should recede to $1,000,000 daily there 
would be no shock to the financial system. This 
system is impregnable; it cannot be shaken. 



AND ABOLISHING CRIME 131 

When the money supply is released from the 
burdens it is now carrying there will be a remark- 
able increase in the amount of business transact- 
ed. This money system will be fully able to take 
care of this expansion. Every time a dollar is 
needed it is issued; when it performs its duty it 
is taken up. 

CHECKS VS. GOLD 

It has been stated that 95 per cent of the bus- 
iness is done with checks, 4 per cent with paper 
money and bank notes, and about 1 per cent with 
gold and silver. More than half of the metallic 
money used is silver. This small per cent of me- 
talic money is the most productive of crime of 
any agency in existence. It enables criminals to 
ply their trades in secret and then screens them 
from detection. The present financial system is 
to the criminals' liking. It enables him to work 
in secret and leave no tracks behind. It is doubt- 
ful if 10 per cent of the criminals are detected and 
arrested. Some will doubt the correctness of this 
statement. Such persons do not have to accept 
this statement as true. They can make a list of 
the crimes committed in their neighborhood and 
then check off the ones arrested. This will give 
an idea of the per cent apprehended and convicted. 

The present financial system is, very largely, 



132 FINANCING THE PEOPLE 

responsible for the crimes committed and for the 
failure to arrest and punish the guilty parties. It 
is estimated that a crime is committed every sec- 
ond, and that there are millions of continuotfs 
crimes that do not cease. 

The Union Finance is a panacea for these evils. 
In addition to being a financial system it is, inci- 
dentally, a moral agency that, in preventing crime, 
excels any criminal statute. Yet it is not intend- 
ed as a criminal statute. It simply provides a 
system of finance and business in which criminals 
cannot operate. It shuts the door so they cannot 
enter, rather than leaves the door open and threat- 
ens with punishment all who enter. 

UNION FINANCE PREVENTS CRIME 
Two very short sections enacted into law would 
practically abolish all crimes. These two sections 
are: First, no gold nor silver shall circulate as 
money. Second, all payments of debts and con- 
tracts shall be made by check. 

The gold and silver held as a reserve fund 
would be kept in the United States treasury at 
Washington. It would have no purchasing nor 
debt paying value. If any one should demand gold 
or silver it would be weighed to him. After get- 
ting this bullion he could keep it or sell it. If he 
should sell it he would have to sell it as a commo- 



AND ABOLISHING CRIME 133 

dity and accept a check as payment. He could 
not sell the bullion for any more than he paid the 
government for it. If he should give a $10,000 
check for the bullion, and sell it for a $10,000 
check, nothing would be made by the transaction 
and there would be no incentive to demand gold 
or silver. This metallic money could not be of any 
utility or profit to any one. It could not be loaned, 
traded nor used as money in any way. The only 
way the owner could get rid of it would be to turn 
it back to the government at the same price he 
paid, or sell it to some individual as ore or bullion. 
Under such regulations the government gold and 
silver reserve would be kept intact and up to legal 
requirements. If any person should withdraw any 
of the federal reserve for the purpose of affecting 
the money supply, or its value, he should be pro- 
hibited from selling to any other than the govern- 
ment. With these regulations embodied in the 
scheme of finance, the basic money is placed be- 
yond the control of speculators and manipulators 
and monopolies, 

LEGAL TENDER 
The Federal Reserve, or Redemption money be- 
ing established, a circulating medium should be 
provided. One of the first regulations should be 
the withdrawal from circulation of all bank notes 



134 FINANCING THE PEOPLE 

and paper money of every kind. They should no 
longer pass current as money. This would wipe 
out all so-called government money. 

To take the place of the present government 
money, a comprehensive check system should be 
adopted. This must be a system that will meet 
all exigencies in business and finance. It must in 
reality be a financial, or money system. 

In the system proposed every person issues the 
money to meet his own needs and finance his busi- 
ness. The individual is substituted for the Na- 
tional Bank in the present scheme of finance. The 
National Bank notes under the present plan are 
the checks of the banks. These banks deposit se- 
curity with the government, and the government 
then permits them to issue bank notes against 
this security. This security is nothing more than 
a deposit with the government ; the bank notes are 
nothing more than checks. The banks may sign 
the notes and put them out as fast as they please. 
They are of no value until signed by the bank, and 
the bank does not have to sign and issue them to 
the public unless it thinks it best. 

Under the Union Finance the individual depos- 
its a certain sum. If he wants it all subject to 
immediate use he takes checks, or bank notes for 
the full amount. These checks or notes are print- 
ed in all denomination corresponding to the de- 



AND ABOLISHING CRIME 135 

nominations of money now circulating. If an in- 
dividual deposits $1,000 he will be paid the amount 
of his deposit when it is made. In other words, 
he cashes his credit at the time he presents it for 
deposit. These checks are no good until counter- 
signed by the person to whom they are delivered. 
In this way no one can overdraw- his account. He 
lias no more checks than he has deposited credit. 
When all credit is exhausted there must be an- 
other deposit before further checks can be issued. 
In other words, he is given no checks in excess of 
the amount deposited in the bank and cannot, 
therefore, overdraw his account. 

If the depositor does not want all of the de- 
posit subject to checks any amount less than 
the total deposit will be delivered to him. When 
these checks are exhausted an additional supply 
may be had and this process repeated as long as 
there is a balance due the depositor. Under the 
present plan the banks deposit security with the 
government and issue checks against it until the 
limit is reached ; under the Union System the in- 
dividual deposits security with the bank, and 
checks it out as needed. 

This deposit of security with the bank is really 
a deposit with the government. The government 
extends to the individuals the privilege it now 
grants the banks. This intermediary between the 



136 FINANCING THE PEOPLE 

government and the people is cut out and the 
great expense of supporting it is saved. It also 
takes the credit of the country out of the control 
of this intermediary and places it with the people 
where it can, at all times, be used without paying 
tribute to the banks. The credit that transacts 
the country's business passes direct from the gov- 
ernment to business and back to the government 
without making the circuit through the banking 
institutions as it now does. This would greatly 
facilitate business and remove one of the worst 
restrictions now fastened upon business and in- 
dustry. 

These Union checks are money to the same ex- 
tent that national bank notes are now money. 
They are made a legal tender for all debts. Every 
purchase of property, all debts, and contracts are 
paid by check. The checks must state the name 
of the payee and for what it is given. When any 
check is presented it is credited to the person 
named, and this regardless of who presents it. If 
some one should find or steal a completed check, 
and present it for payment, it would be credited 
to the payee named and not to the finder or thief. 
So a thief finding a check and presenting it for 
payment would just deposit it to the credit of the 
rightful owner. All checks would be made non- 
transferable so there could be no possibility of 



AND ABOLISHING CRIME 137 

any speculation in the money supply. These reg- 
ulations take the finance out of the control of 
speculators and place it on a higher plane, 

UNION FINANCE AND CRIME 
The new scheme of finance is strictly a bank- 
ing measure. It does not primarily propose any 
social reforms or regulations. It provides no pun- 
ishment for criminals ; yet, it practically stamps 
out ail crime. It abolishes dens, dives, disreputa- 
ble places that are operated in secret. It raises 
the underworld and slums to the light that with- 
ers them and drives them out of business. 

HOW IT KILLS CRIME 
One of the first crimes to go would be bank 
robberies. All gold and silver would be kept in 
Washington, in the United States Treasury, as a 
reserve fund. There w r ould be none of the gold 
and silver kept in any bank; nor would there be 
any money in the banks that a thief could use if 
stolen. The only money in the banks would be 
blank checks and they would have no value until 
countersigned by some one having a deposit in the 
bank. Therefore there would be nothing in the 
bank that a thief could use, and consequently bank 
robberies would be impossible. With bank rob- 
beries would go all thefts where the object would 
be to obtain money. 



138 FINANCING THE PEOPLE 

ALL CRIMES GO 

Another class of crimes would go that now 
take large amounts of money annually ; this is em- 
bezzlements. That crime would be impossible un- 
der the Union plan. All money received by any 
concern is made payable to it, and if a clerk should 
embezzle $1,000 of this money, there is no place 
to cash it except at the bank on which it is drawn. 
When the clerk presents the money it is deposited 
to the credit of the concern to which it is payable, 
and the clerk has gained nothing in the attempted 
embezzlement. 

It is impossible, under the new system, to com- 
mit that old crime that has been the night-mare 
of business for ages. It would be gone never to 
return, and with its disappearance, goes hundreds 
of millions of expenses that it has fastened upon 
business. The auditors on railroads, and the 
checking and watching that is employed in all 
stores and businesses would be dispensed with. 
The knockdown in business would be entirely 
eliminated because impossible. 

CRIME COST $2,000,000,000 

Crimes and thefts are estimated to cost $2,- 

000,000,000 annually. Automobile thefts alone 

are estimated to cost $300,000,000. These crimes 

would be largely prevented by the Union check. 






AND ABOLISHING CRIME 139 

If a sneak thief should break into a house and 
steal a watch, or other property, the bank would 
oe notified of the theft. The thief, when he sold 
the watch, would get a check stating that it was 
given as payment for "one gold plated watch, " or 
a certain piece of jewelry. When this check is 
presented to the bank, the thief would be appre- 
hended. It might be possible for some to "run 
the gauntlet" and not be detected at the time oi 
presenting the check, but risk is so great and 
chances so against the thief that it would be only 
a most daring character who would take the 
chances. These checks are always open to the in- 
spection of the officers of the law, and the crimi- 
nals could soon be ferreted out, and crimes for pe- 
cuniary gains would soon pass into the category 
of the "by gones." 

PROHIBITION LAWS 

The enforcement of the liquor laws would be 
very easy with the Union check. If a person 
should buy a pint of whiskey for five dollars he 
vvould give a check stating that it was given for 
one pint of whiskey, and it could not be cashed 
without the guilty party being detected and ar- 
rested. 

Public officials could not be bribed, nor courts 
and juries corrupted. This policy brings open di- 



140 FINANCING THE PEOPLE 

plomacy into all private and public affairs. Hon- 
esty welcomes such publicity, and outlaws should 
he forced to accept it, 

PROSTITUTION KILLED 
One of the most sweeping changes wrought by 
the new finance is its effect on commercialized 
vice. No woman could get checks for such pur- 
poses, nor cash them if received. This would re- 
sult in a great advancement in the morals of the 
country. 

This same restriction on crime applies to the 
whole list of the violators of the law. Gambling, 
forgeries, murder, pickpockets, robberies, false 
personation, and all criminal methods employed 
to get money, are wiped out by the Union check. 

FALSIFIED CHECKS 
It may be suggested that these checks could 
be falsified so as to hide the real purpose for which 
issued, and thereby evade the law requiring pub- 
licity. That is very easy to plan, but would be 
very difficult to carry out. Suppose that a public 
official should be paid a bribe. This check then, 
would be falsified by stating that it is given as 
payment for the purchase of certain property. 
The government could very easily determine if it 
was a real purchase or a mere subterfuge. If the 






AND ABOLISHING CRIME 141 

check is proved to be falsified both parties would 
be guilty of two offences : First, bribing and being 
bribed; and second, forgery. Either of these 
crimes would be punishable by a term in the pen- 
etentiary. People would hardly commit such se- 
rious crimes if they had to give written state- 
ments that could be easily disproved. 

PUBLICITY KILLS CRIME 
When peopled acts and conduct are brought 
before the public, there will be real circumspec- 
tion in their daily life, walks and business. The 
impenetrable darkness and ignorance of the un- 
derworld and slums of the cities will be removed 
when the inhabitants are forced upon a higher 
plane where they are constantly in the glare of 
ar exacting and scrutinizing public. 

Darkness and secrecy are the emblems under 
which crimes are committed; light and publicity 
are the flags carried by the enemies of crime, and 
no crime can prosper under these banners. The 
Union check means death to crimes, since it brings 
them into the light of public scrutiny. 

PERSONAL REPORTS 
The Union system is also a reporting system. 
When the individual goes to the bank with his 
check it amounts to a personal report of himself, 



112 FINANCING THE PEOPLE 

or an accounting. When he repeats this day after 
day the government gets well acquainted with 
him. It knows just what he is doing, how much 
money he is taking in and how much he is ex- 
pending. It knows where he is employed, what 
kind of people he is getting his money from, what 
kind of business associates he has, and what kind 
of company he is keeping. In fact, his whole life 
is open to the government for inspection. It 
brings each person in direct and close contact with 
the government, and every citizen knows that ev- 
ery act done is seen by his government. If he 
buys, the government knows it; if he sells, the 
government sees it. If he gets a dollar or gives 
a dollar, the government witnesses the transac- 
tion. The government is omnipresent in all busi- 
ness deals and operations. Nothing will be under- 
taken that will not bear Uncle Sam's penetrating 
search-light. If checks bearing the ear marks of 
shady transactions are continually being presented 
by any person, the government can very easily 
determine whether there is some law being violat- 
ed. Continuous and professional law-breakers can 
not ply their avocations without a suspicion that 
will lead to detection and a conviction. 

PAYS GOVERNMENT EXPENSES 
We have considered the Union system as a 



I 



AND ABOLISHING CRIME 143 

financial measure and also from the standpoint of 
crime prevention. We now come to the third 
function of this system ; that is, its usefulness as 
a revenue producer. The loan feature of the sys- 
tem is of great importance in meeting govern- 
ment expenses. The system should net the United 
States at least $7,000,000,000 revenue annually. 
The government would take over all interest-bear- 
ing obligations at their present rated value and 
would pay the holders of such obligations cash so 
that there would be no further interest charges 
taxed against the people through the government. 
Thomas A. Edison estimates that 80 per cent of 
the government expenses are for interest charges. 
Under this estimate the people are paying annual- 
ly approximately $1,000,000,000 to support the 
government and $4,000,000,000 to support the 
financiers. Under the proposed plan this payment 
to the financiers would be eliminated from the 
government budget and $1,000,000,000 would suf- 
fice to meet the government expenses. The rev- 
enue received from the government loans, amount- 
ing to from $6,000,000,000 to $9,000,000,000 an- 
nually would pay this government expenses and 
leave several billions for other purposes. It could 
be used to provide an adequate national school 
system, relieve the widows and orphans, pay the 
total cost of the transportation systems, provide 



144 FINANCING THE PEOPLE 

homes for the homeless, and launch upon a sys- 
tem of alleviating conditions of those from whom 
the wealth has been taken. 

This interest paid in this way instead of being 
a burden, as it is now, would be a great blessing. 
It would supplant the present system of taxation, 
it would pay all freight charges and thus give 
the producers and consumers free delivery of 
freight throughout the United States, pay all 
school expenses and take care of the children, ex- 
tend adequate relief to the widows and orphans, 
and within a very few years provide homes for 
every American citizen, abolish crimes and thus 
save the expenses of enforcing the criminal stat- 
utes, and the government would not be to any ad- 
ditional expenses in carrying out this humane pro- 
gram. The 6 per cent interest on loans would be 
gladly paid and it would come back to the people 
in the manyfold benefactions above outlined. It 
would be like taking one dollar out of one pocket 
and putting it in the other when it becomes two, 
or three or four dollars. 

AS A WEALTH PRODUCER 

The fourth function of the Union is its wealth 
producing qualities. The wealthy are trying to 
accumulate money to sell for interest. Vast for- 
tunes are being used in non-productive enter- 






AND ABOLISHING CRIME 143 

prises. This wealth is seeking an opportunity to 
increase its profits. Whether it goes into produc- 
tive, or non-productive business is immaterial. 
Many shrewd men are wasting their time and tal- 
ents conducting businesses that are not creating a 
dollar of wealth for the country; but are absorb- 
ing the wealth that other money and brains have 
created. They are drones living on other men's 
productions. Such are content to exist and die 
without the world gaining a farthing from their 
efforts. They have consumed largely and pro- 
duced nothing. They have taken the pleasures 
others have earned ; they have forced upon others, 
burdens w T here happiness should have been the re- 
ward. The Union would change this. Under the 
Union the man of wealth who wants to increase 
his riches must find some active employment for 
his funds. Money and brains must both be used. 
Money will seek investments to get profits; that 
much is certain. It is also certain that interest 
would no longer be open for private income pro- 
ducing. That means more than can be believed 
at this time. It would double the amount of pro- 
ductive wealth, and back that with double the 
present brain force ; then added to this is an elas- 
tic currency that functions several times faster 
than the present one. 

Inventions and sciences would be promoted and 



146 FINANCING THE PEOPLE 

stimulated. Initiative in all lines of endeavor 
would be taken and idle brains and hoarded money 
would become active, and the wealth of the na- 
tion and the happiness of the people would be aug- 
mented. This transformation from lethargy to 
activity and industrial expansion would revivify 
the w r hole nation and its business. Even the men 
who would witness the disappearance of their own 
loan business would soon find employment for 
their brains and money in some more useful and 
greater wealth producing enterprises. 

The consumers would have so much more 
money to spend for necessaries and comforts that 
their production would be largely increased. Here 
we are warned against over-production. It is 
claimed that American consumption cannot be 
very largely increased. It is asserted to be near 
the maximum now. Over-production is one thing, 
under consumption is another. The latter is some 
time mistaken for the former. As long as people's 
needs, wants or even fancies are not supplied there 
is an underconsumption. 

A widow in New York makes the statement 
that she and her two sons cannot live on $20,000 
per year. Cabinet officials resign because they 
cannot live on $12,000 a year. How much would 
productions have to increase to supply every one 
with a $12,000 annual consumption? That smah 



AND ABOLISHING CRIME 147 

consumption does not satisfy and yet it would 
mean an annual consumption of $240,000,000,000. 
The American people are capable of consuming 
that amount and then complain because it is in- 
sufficient to satisfy their needs. 

On the basis of the widow and her two sons 
it would require more than $600,000,000,000 to 
supply the Americans one year. Even then there 
would be a complaint of an insufficiency. This 
just gives a faint idea of the opening right here 
in America for increased consumption. If this 
field is properly worked it will open unlimited op- 
portunities for productive wealth to find invest- 
ments. It also expands the brain power and util- 
izes it in wealth producing. 

WORLD FINANCE 

The Union bank will be the greatest banking 
institution in the world. It will easily place the 
United States at the head of world finance, and 
give industrial America a standing it can get in 
no other way. American business, backed by sueh 
a strong finance, would invade the markets of for- 
eign countries as never before. To facilitate this 
foreign trade the United States will establish 
branch banks in other countries to meet trade re- 
quirements in making payments without the nec- 
essity of transporting gold bullion back and forth 
to pay balances that may arise between nations. 



CHAPTER XII 

UNION FINANCE AND LITTLE BUSINESS 

As stated in a previous chapter, less than 10 
per cent of American brain is being utilized. A 
very small portion of the productive power is em- 
ployed. More than half of the brain and energy 
of the nation are going to waste. Why this waste 
when the cry is for increased production? Why 
is not the brain and energy working at full capac- 
ity to supply the shortage in production? The 
answer is easily given. 

First. The money of the country is in the 
hands of less than 10 per cent of the population. 

Second. The business is controlled by men 
who are within that 10 per cent limit. 

Third. Finance extends very little credit to 
any one outside of this 10 per cent circle. This 
means that the wealth and business are congested 
into the hands of this very small group. They are 
kept within that circle. Business, within these 
narrow limits, borrows practically all money the 
financiers have to loan. Financiers loan very little 



AND ABOLISHING CRIME 149 

money to business outside of the prescribed 
bounds. So these two — Finance and Business- 
pass the money supply from one to the other and 
hold it quite fast from the other 90 per cent of 
the people. Thus there is provided a financial 
system that excludes the great majority from par- 
ticipating in its benefits. 

It follows that the present system is not in the 
interest of the people ; but that its benefits are be- 
stowed upon the few. The system fits the 10 per 
cent ; the other 90 per cent are struggling for life. 
Now what is to be done with these struggling mil- 
lions? They are doing a very small business be- 
cause they cannot do more. The finances are not 
available for their assistance. Give this 90 per 
cent all money needed, and production and busi- 
ness will increase several fold. The real brains 
and energy of America are unproductive because 
they have no financial system to back them. 

It is estimated that 95 per cent of the business 
men fail. Some time in their business career they 
need more capital to tide them over for a short 
time. Not getting this assistance they fail, prob- 
ably never to recover. 

The Wall Street Journal states that 99 men 
out of 100, who fail in business after reaching the 
age of forty-five years, are not able to recuperate 
their losses. Once out of business, they become 



150 FINANCING THE PEOPLE 

a total loss to the industrial activities. 

To these imputations against Finance it re- 
plies by stating that the fault lies with the 90 per 
cent who do not have sufficient capital to justify 
the extension of a credit ; a loan to this small bus- 
iness is unsafe and is therefore withheld by finan- 
ciers as a matter of business policy. This reply 
does not meet the objection. If it is unsafe to 
loan money to 90 per cent of the people, under 
the present system, the fault is with the system, 
and not with the people. They cannot help being 
poor. They are struggling to get above the pov- 
erty line, but are barely holding their own, if not 
falling back. They cannot be moulded to fit that 
system. There is no way to place them where 
they can enjoy the benefits of it. Then, what 
should be done? What did Mohamet do when the 
mountain didn't go to him? There was only one 
thing to do: go to the mountain. In this case if 
we have a system that the people cannot go to for 
assistance, let's bring the system to them. 

Adopt a system that every person can partici- 
pate in. This would be a very easy undertaking 
if the legislative brain desired to make the change. 
American legislators have not been wanting in 
constructive intelligence along lines they wanted 
to follow. When they want to adopt a financial 
policy that will meet present-day demands, they 



AND ABOLISHING CRIME 151 

can agree upon one quickly. 

THE UNION FINANCE 

The Union Finance outlined in a former chap- 
ter would meet the requirements of small business. 
Business men, without regard to wealth, could go 
to it for financial assistance when in distress. This 
would draw business back among the small deal- 
ers, men of small means, from whom it has been 
driven. Monopolies would have to cease be- 
cause they would have no advantage over the 
small dealers and there would be no object gained 
by their organization. 

CAPITALIZATION OF LABOR 
Slaves were capitalized. Some had values of 
several thousand dollars placed upon them. Banks 
would loan money on them as chattels. A slave 
freed becomes worthless, a free white man is con- 
sidered no better. Labor has no commercial value. 
Financiers place no value whatever on it. Why? 
Labor has more inherent value than capital, and 
yet, the financial system does not include labor in 
its list for benefactions. Some economist esti- 
mates that an average workingman has an intrin- 
sic value of $15,000. Others estimate his value 
at $10,000, and still others place it as low as $5,- 
000. Forty millions of the population are em- 
ployed in gainful occupations. Taking half of 



. 



152 FINANCING THE PEOPLE 

this number as average workers, gives them a to- 
tal valuation of $200,000,000,000. Giving to the 
other half a fifty per cent valuation places their 
aggregate value at $100,000,000,000. This gives 
a total labor valuation of $300,000,000,000, and 
yet it is outlawed by financiers and rated as com- 
mercially worthless. Capital, with a valuation of 
$200,000,000,000, has a credit and rating almost 
equal to its estimated value. It loans to itself this 
entire credit and refuses to grant any favors to 
the greater body of wealth-labor. 

A six per cent profit on the capital invested 
would yield an income of $12,000,000,000 annually ; 
a six per cent profit on the total labor invested 
would yield an annual income of $18,000,000,000. 
Wealth has a financial system ; labor does not. 

Union Finance would finance labor with the 
same ease that it would extend credit to wealth. 
A working man could be extended a credit and pay 
this back in small monthly payments. 

It may be contended that many people would 
borrow money, and even if they had steady em- 
ployment, would not apply their wages toward 
paying their debt at the bank. This would be im- 
possible. Every check they get as payment of 
wages must be presented to the bank from which 
they obtained the loan. There is no other place 
to present it, nor can it be transferred or assigned 



AND ABOLISHING CRIME 153 

to some other person. When a workman presents 
his check for payment the amount due on his loan 
is taken out of the check, and he is paid the re- 
mainder. 

Another contingency may be suggested here. 
A man might borrow to the limit at one bank and 
move to another town, leaving the indebtedness 
behind him unpaid. This would not work. When 
a man leaves one town for another he must take 
his bank account with him. And until this bank 
statement is presented he is perfectly helpless. 
This account is presented to the bank at his new 
location and the account is opened just as it was 
in the bank from which it was transferred. And 
he could not cash a check nor open an account un- 
til this statement is presented. 

A man would be perfectly helpless in a new 
location without this bank transfer. He could not 
even buy groceries, pay a debt, nor borrow a dol- 
lar from a friend. He could not "hide out." if he 
wanted to. Not even criminals could ply their 
trades and conceal themselves from the officers 
of the law. If a criminal should operate in one 
place and then go to another city to avoid detec- 
tion, he could not steal property and sell it and 
get it cashed until he has his bank account certi- 
fied to the bank where he wants to cash his check 
received for the stolen property. 



R Mv : ^ 



5-5 



